Why inflation is both good and bad for your walletInflation is here and higher interest rates may follow — much to the delight of savers who’ve endured rock-bottom returns on cash and other safe investments since the Great Recession.
But inflation is a double-edged sword. Higher prices that consumers pay for goods and services may completely gobble up their extra savings.
“It’s one of those things where the interest rates give with one hand and inflation takes away with the other,” according to Christine Benz, director of personal finance at Morningstar.
Rising prices
Consumer prices jumped 4.2% in April from a year earlier, the biggest bump since 2008.
On one hand, that acceleration makes sense — a year ago, the Covid pandemic buckled the U.S. economy and inflation was low. With the Covid threat waning, consumer demand (along with some supply shortages) is pushing up prices in certain sectors.
But it’s unclear if the dynamic is temporary or something more permanent.
The latter would generally lead the Federal Reserve to raise interest rates, in order to increase borrowing costs and, hopefully, keep the economy from overheating.
Rates on savings accounts, money-market funds and certificates of deposit, for example, would likely tick up — instead of being the equivalent of “mattress money” with practically no yield, according to Diahann Lassus, managing principal at Peapack Private Wealth Management in New Providence, New Jersey.................
https://www.cnbc.com/2021/06/03/why-inflation-is-both-good-and-bad-for-your-wallet.html
