LHBS Faculty Speak on Nation’s Inflation

Professors of the Leon Hess Business School have raised concerns about current inflation rates in the U.S. and how it affects Monmouth students.

Richard Roberts, MBA, former executive of the Federal Reserve System and current Specialist Professor in the Department of Economics, Finance, and Real Estate, explained the concept of inflation, “Inflation is an increase in the average price of the goods and services that we buy, such as housing, food, energy, and transportation,” he said. “Americans this past year have faced the highest inflation rates in 40 years. Prices are increasing by around eight percent per year, and this rapid price acceleration is in stark contrast to the last 10 years when annual inflation rates averaged about two percent.”

Roberts attributes the rise in prices to the COVID-19 pandemic, and how its impact on aggregate demand and supply has led the country to its present-day state. He said, “In hindsight, well-intended U.S. policymakers, such as Congress and the Federal Reserve, responded excessively to the pandemic. Their actions have led to a more significant than anticipated increase in the demand for goods and services, contributing to our higher prices.”

In past semesters, the University has granted federal aid in the form of HEERF grants and other stimulus checks because of the pandemic. Nonetheless, Roberts notes that the degree at which the federal government was relieving financial burdens is why we find ourselves where we are today. “Congress responded to the pandemic through various new policies, including sending out stimulus checks and enhancing unemployment insurance. Moreover, monetary policymakers responded concurrently by lowering interest rates to near zero percent and aggressively adding liquidity to the economy,” said Roberts.

From a supply perspective, Roberts mentioned that the global pandemic created more difficulties associated in manufacturing and transporting supplies from one part of the world to the other. “Supply chain challenges are partly caused by the lingering effects of the lockdowns, and a sharp increase in the demand for goods also adds fuel to the surge in prices,” Roberts said. “For example, automobiles require microchips to run. Semiconductor shortages have slowed the supply of auto production and driven up car prices.”

Nonetheless, Roberts, along with Professor of Real Estate, Donald Moliver, MA, Ph.D., are optimistic about the slow of inflation. Roberts said, “Inflation will return to normal levels, but not soon. The demand and supply issues that I previously discussed need to be resolved.”

To counteract those issues, Roberts emphasizes the work of the Federal Reserve. “The Fed has begun to increase interest rates to tame excessive demand. I expect they will continue to raise rates throughout 2022 and into 2023.”

“I believe there will be multiple interest hikes this year and probably into next year, as well,” Moliver agreed. “Those hikes will make the cost of credit (money) higher and should reduce the inflationary spiral. Between that and supply chain issues slowly being resolved prices should come down somewhat.”

Sara Nemshick, a senior business student and Roberts’ Peer Assisted Learning (PAL) Leader for his Money and Credit classes, believes it is important for students to stay informed about national economic trends. “It is essential that students understand what is going on in the economy because the future of the financial sector lies with our generation. We can only make the changes needed to strengthen our financial positions if we are aware of policies that directly affect our lives,” said Nemshick.

According to Roberts, inflation affects students just as much as other Americans. Alyssa Torres, senior Biology undergraduate, explained how higher inflation rates have affected her as a commuter student. “Since gas prices have gone up, I have definitely had to second guess making trips to Monmouth or extra trips I normally wouldn’t think twice about.” Roberts’ conclusions reflect Alyssa’s and other student’s reality: “In a nutshell, rapidly rising prices hurt us because our money doesn’t purchase as much as it used to.”