A recent Goldman Sachs analysis said that inflation could be a bigger problem than the COVID pandemic when it comes to the global economy.

The investment bank noted that the Federal Reserve would likely begin raising interest rates as inflation rates in the United States go on, The Daily Wire reported.

Goldman Sachs also expects a reduction in consumer fear over the virus as medical advancements continue to curb the spread of the COVID infection.

The Department of Labor announced on Wednesday that year-over-year inflation for consumer prices had peaked 6.2 percent last month, which is the highest rate of increase in 30 years.

MacroPolicy Perspectives economist Laura Rosner-Warburton told The Wall Street Journal that she thinks the country is moving into a new phase where inflation is broader, and things are going to get a "little more intense."

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Inflation in The United States

Goldman Sachs economists also warned that inflation could last longer than expected as surging demand struggles to keep up.

Fox Business reported that they wrote that the process would take longer than initially expected, and the inflation will likely get worse before it starts to improve.

The economists added that they do not think that aggregate demand is on an unstable trajectory or that inflation expectations have become not anchored.

Federal Reserve Chairman Jerome Powell pinned the blame of inflation in 30 years on supply chain bottlenecks, pandemic-caused shortages, and pet-up consumer demand.

Powell also blamed wage pressure from a tight labor market. The chairman said their main expectation is that supply bottlenecks and shortages will last into next year with elevated inflation as well. He conceded that inflation could last into the latter half of 2022 before it begins to fade away.

COVID Pandemic on The Global Economy

The FTSE, Dow Jones Industrial Average, and the Nikkei saw a huge decline as the number of COVID cases grew in the first months of the pandemic, BBC News reported.

In addition, many people have lost their jobs or have experienced income cuts. Unemployment rates have grown across major economies.

International Monetary Fund (IMF) noted that the proportion of people out of work in the U.S. reached a yearly total of 8.9 percent, which had ended a decade of jobs expansion.

Millions of workers were placed on government-supported job retention schemes as some industries, such as tourism and hospitality, had come to a near standstill.

The travel industry has particularly taken a huge brunt of the pandemic, with some airlines cutting flights and consumers canceling business trips and holidays.

Meanwhile, the pharmaceutical industry has seen a vast take-off, with governments worldwide pledging billions of dollars for COVID vaccines and other treatment options.

Moderna, Novavax, and AstraZeneca have seen significant increases. However, Pfizer has seen its share price fall due to its partnership with BioNTech, the high cost of production and management of the vaccine, and the growing number of competitors. Johnson & Johnson and Sanofi/GSK had joined the vaccine distribution this year.

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This article is owned by Latin Post.

Written by: Mary Webber

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