Millions of Americans will have to pay more this year because of inflation, according to a Penn Wharton University of Pennsylvania Budget Model analysis.
The average US household will need to spend an additional $3,500 in order to maintain the same level of consumption of goods and services in the year 2021.
Lower-income households will have to spend 7 percent more on goods and services that have been impacted by inflation, while higher-income households will have to spend 6 percent more.
The estimates were made using the Consumer Expenditure Survey (CE), a nationwide household survey conducted by the Bureau of Labor Statistics, and the November 2021 Bureau of Labor Statistics Consumer Price Index.
They assumed that consumption patterns would not change this year as they had assumed in the past.
Between November 2020 and November 2021, the bottom 20 percent spent more on food, energy, shelter, and other services.
The higher-income households spent more on food, energy, shelter, and other services.
The bottom 20 percent of income-earners saw their consumption expenditure increase by 6.8 percent to $2,160 per household, while the top 5 percent saw an increase of 6.1 percent. The data shows that middle-income earner saw an increase of 6.8 percent.
The analysis said that higher-income groups saw a bigger increase in expenditures and a bigger increase in total expenditure. Higher-income households spent more on services which experienced the smallest price increases.
Lower-income households spent more on energy when prices had large increases, according to the analysis.
The Federal Reserve said on Dec. 15 that it will end its stimulatory policies sooner than expected.
The central bank said it will speed up its bond purchases, bringing the monthly withdrawal to $30 billion, compared to 15 billion last month, and that it will end its bond purchases by March, opening the door for interest rate increases in the first half of 2022.
In a significant shift from the September meeting, officials now expect three quarter-point rate increases in 2022.
The Committee decided to reduce the monthly pace of its net asset purchases by $20 billion for Treasury securities and $10 billion for agency mortgage-backed securities in light of inflation developments and the improvement in the labor market.
The Committee will increase its holdings of Treasury securities by at least $40 billion per month and agency mortgagebacked securities by at least $20 billion per month in January.
Powell said at the press conference that the move to phase out bond purchases more quickly was due to elevated inflation pressures and strong labor recovery.
The reopening of the economy and supply and demand imbalances have contributed to elevated levels of inflation. Financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.
The House voted early on Dec. 15 to raise the debt ceiling by a quarter of a trillion dollars, just in time for the deadline set by the Treasury Department and narrowly avoiding an economic crisis.
The debt ceiling has increased in recent years and is the largest in recent history.
By Katabella Roberts.
Roberts is a reporter in Turkey. She covers business and news for The Epoch Times.
