During 2020-21, the government sent a $5 trillion avalanche of money back to the people through stimulus checks, which helped America survive the pandemic.
The majority of direct payments went to homes and businesses. More than $1 trillion has entered people’s bank accounts through only advanced Child Tax Credits and direct stimulus payments. Trillions more came to them over time due to changes to programs like SNAP.
US Stimulus Checks
Inflation is a natural and expected consequence of economic growth. Businesses grow, more people are hired, unemployment falls, and households have more money to spend, increasing demand for goods and services and raising prices.
On the other hand, the economic effects of the epidemic were neither expected nor natural and the current inflation rate of 8.3%, which has been resting for months at a 40-year high, could be argued to be the same.
Prices typically rise slowly during periods of economic expansion, so it stands to reason that a large inflow of stimulus funds would cause prices to rise quickly.
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Recession, Inflation To Further Affect Consumers
As inflation threatens consumer demand, the largest US banks are bracing for a worsening economy next year. JPMorgan Chase & Co. CEO Jamie Dimon told CNBC that while businesses and consumers are doing well, this may not last long as the economy weakens and inflation prevents consumer purchasing power.
The pandemic stimulus initiatives have provided consumers with an additional $1.5 trillion in savings, but it may be depleted by mid-2023.
Furthermore, Dimon stated that after raising benchmark interest rates to 5%, the Federal Reserve may take a three to six-month break, but this may be “insufficient” to reduce rising inflation.
The US Federal Reserve raised interest rates by 75 basis points to 3.75%-4% in its fourth consecutive meeting last month, but it also hinted that it hoped to switch to smaller increases at its next meeting.
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