How does Inflation work?

Inflation continues to be one of the most pressing concerns on both Main Street and Wall Street.

The high inflation rate is forcing the Federal Reserve into a cycle of raising interest rates.

Inflation is identified by the Consumer Price Index (CPI), which measures the cost of goods and services the consumer buys. These costs can be influenced by many economical factors that often result in supply and demand constraints, leading to price fluctuations. And, when prices rise, we feel the result... that our dollar doesn’t buy as much as it did. The Federal Reserve’s job is to control inflation. By raising interest rates, the Fed hopes to slow spending and stabilize consumer prices.

The main worry for economists is if the Feds raise interest rates too quickly, it will slow down the economic recovery.

Final thought.

Your overall investment strategy should consider that there will be transition periods in the economy. If you have any questions or concerns regarding recent events and your portfolio, let us know. We're always ready to help.

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About the Author

Nathan Gale is a CFP® professional with a Master of Science in Personal Financial Planning from Kansas State University. He joined Peak Wealth as a Financial Planner in 2022 and is passionate about holistic financial planning and therapy.

Peak Wealth Planning provides concierge services to meet your wealth management needs. Services include: financial planning, investment management, ESOP diversification, retirement income, insurance, and estate planning guidance. Peak Wealth Planning is a fee-based financial advisor based in Chicago, Illinois, and Colorado.