The United States of America was able to avert a major economic downturn or depression owing, in large part, to the gigantic stimulus check bundles that were passed by Congress in the years 2020 and 2021. The flood of cash that was distributed to businesses and individuals, on the other hand, helped to prop up the inflation rate.
The United States economy made a roaring comeback in 2021 after being released from the lockdowns enforced by the pandemic; nevertheless, in 2022, the economy finds itself in a precarious position.
Can Stimulus Checks Drive Inflation?
Now, the authorities need to decide whether or not providing Americans more spending money would lead to more inflation or would assist them in becoming better equipped to manage price increases. The following discussion includes the opinions of a few authorities on the subject, as well as an analysis of the requests and permissions made at the state level for smaller payments from the stimulus check.
Even if the precise effects of the additional $5 trillion put into the American economy even while the country was in the midst of an epidemic are arguable, there is no doubting that it contributed to the general upward trend in inflation. Since the beginning of 2021, when the Federal Reserve Bank of San Francisco estimated that stimulus payments contributed about 3% to the inflation rate in the United States, prices have continued to climb there despite the fact that the government has cut back on its spending.
It has been reported by both the JPMorgan Chase Institute and the Washington Post that the pre-pandemic levels of bank balances in the United States have not yet been surpassed, despite the fact that bank balances have significantly grown as a result of the distribution of stimulus monies. This may be interpreted to mean that any more stimulus checks will be spent on luxury products rather than essentials, so contributing to further price inflation.
