The national inflation rate hit another record high.

Tim Heisterkamp with Journey Financial in Jefferson says the inflation rate for June was around 9.1-percent, compared to two years ago when the inflation rate for June of 2020 was 0.6-percent. He tells Raccoon Valley Radio the main causes for high inflation include the low interest rates, high oil prices, high wages for jobs, supply chain issues and excessive federal government spending. He points out the main way to combat high inflation is the Federal Reserve raising interest rates.

“So when they raise interest rates, what does that really mean? Well it means fewer people want to go out and buy new houses, or build new houses, or people will slow down on buying the cars, especially if they have to borrow money to pay for the car. So when the Fed(eral Reserve) raises interest rates that is supposed to slow the rate of inflation down.”     

Heisterkamp says the current interest rate is between 2.25 and 2.5-percent with the Federal Reserve to meet again on September 7th, where they are expected to increase interest rates by another 0.5-percent. As for whether or not the country is in a recession, Heisterkamp says it fits the classic definition when there are two consecutive financial quarters with negative Gross Domestic Product (GDP) growth, which has happened this year. 

“But I believe what we’re in right now is affecting people at different socioeconomic levels in different ways. So I think some of the wealthier people probably don’t feel it as much, but I think some of the lower income earners are probably really feeling the effects of this inflation. I mean, when it costs so much to fill up your car just so you can get back and forth to work, you’re feeling the pinch of recession. When you go to the grocery store and everything is just a tad bit higher, you’re feeling the pinches of recession, because you just simply don’t have enough disposable income to buy those ‘wants’ you’re spending all of your money on your ‘needs’.”     

Heisterkamp adds another way to gauge if inflation is slowing down is from the job report from the US Department of Labor. He says if the job report, which will be released tomorrow, remains strong, then the rate of inflation will continue to be high. However, if the jobs report is weaker than expected, then the policymakers are happy because the rate of inflation is slowing down.