Everywhere you look these days, prices are up. From small essentials such as fruits, vegetables, eggs, meat, gas and clothing to big-ticket items including cars, housing, utilities and home improvements, consumers are experiencing sticker shock that hasn’t been seen in 40 years. Yet while the average person is just now feeling the squeeze of inflation in their everyday lives, small businesses have been dealing with the challenges for nearly a year and they don’t see relief coming any time soon.

A National Scope

The writing has been on the wall, according to Dr. Sean Snaith, director of the University of Central Florida’s Institute for Economic Forecasting. “While the Russian invasion of Ukraine was one unanticipated event that has had an effect, prior to that we had already been seeing the higher prices for gas and oil, the random shortages caused by supply chain issues, and difficulties in the labor market,” he says. “All of these things have their roots in COVID-19 policies when unprecedented decisions were made to shut down portions of the economy. … The lockdowns disproportionately affected small businesses and lower-income earners. For those who survived, they are faced with higher costs for their supplies—if they can get them—and faced with worker shortages or higher wages to get workers.”

Earlier this month, the Federal Reserve raised its rate 0.25% for the first time since 2018. Snaith says inflation has to be accommodated by monetary policy. “The Fed has kept interest rates extraordinarily low but has also grown its balance sheet from about $800 billion in 2006-07 to around $9 trillion. That puts a lot of liquidity into the economy and I would say that’s analogous to underbrush in a forest being fuel that can feed a fire. The other policies that came due to COVID were the spark that set this burning.”

Snaith says rates will likely continue to increase through the end of the year, possibly into 2023. While it gives the economy a fighting chance against inflation, there won’t be a tremendous amount of relief for the average person, he continues. “Wages have gone up but unfortunately the cost of living has risen faster than pay increases. There might be more dollars in our paycheck but those dollars are able to buy us less than before the raise. … There’s a lot of uncertainty and I think it’s going to be turbulent here for the next six-plus months.”