PHOTO: People shop at a clothing store in Manhattan on April 04, 2022, in New York City.

According to several economists and other financial experts, high consumer demand in the economy — met with low supply — is the main factor driving inflation. The war in Ukraine is also driving up prices, specifically on oil and food, they said.

And the government is limited on intervening, according to experts who spoke with ABC News.

Experts also told ABC News that inflation is likely to be an issue in the coming months, one even saying they expect it to last for years.

Factors driving inflation

Consumers traditionally spend the bulk of their money on services, but during the pandemic, demand shifted toward goods, Stacy Tisdale, financial journalist and founder of Mind Money Media told ABC News.

“You saw that breakdown, you saw manufacturers not be able to keep up with that demand, you saw the challenges that manufacturers were having, because of COVID, then you saw the supply chain disruptions. And that’s kind of what’s underpinning all of this,” Tisdale said.

Strong consumer demand unmet with enough supply, makes for a main driver of inflation, experts said.

“The biggest factor driving up inflation has been extraordinarily strong demand, as consumers have more money in their bank accounts, lower interest rates to borrow at stronger stock prices and a lot of money they saved up because they didn’t spend much in 2020,” Jason Furman, a professor of practice at Harvard and a former top economic advisor to President Barack Obama who served as a chief economist and member of the cabinet, said.

“That’s been exacerbated more recently by things like the higher oil prices due to [Russian President Vladimir] Putin’s invasion of Ukraine,” Furman added.

Some experts think stimulus money exacerbated the increased demand.

“We pumped a lot of demand into the economy, particularly the American Rescue Plan in early 2021, giving everybody $1,400,” said David Wessel, the director of the Hutchins Center on Fiscal and Monetary Policy at Brookings.

“And with the benefit of hindsight, we probably put too much money in people’s pockets — they want to spend it, but the supply side of the economy is unable to accommodate the rapid increase in demand that comes both from the fiscal stimulus and from the fact that people are beginning to relax about the pandemic,” Wessel said.

Furman said inflation in the U.S. is worse than in other developed nations, in part, because of stimulus funds from the government.

“The United States has more inflation than any other major advanced economy. Probably because we’ve had a larger fiscal response. No other countries sent out checks on the scale that we did,” Furman said.

Other experts agree that stimulus payments contributed to inflation, but say the mass distributed payouts are not the cause. The government handed out three rounds of checks to Americans during the pandemic as financial relief, in hopes of boosting the economy.

“You could certainly make the case … that the stimulus package definitely contributed to the inflation rate, but you didn’t have big stimulus packages in Europe. And they’re still looking at 7.5% inflation,” Dean Baker, a senior economist and co-founder of the Center for Economic and Policy Research, told ABC News.

By jdl008

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