Garland County and the City of Hot Springs are expecting more than $30 million over the next year from the March Federal COVID Relief Package.
Monday night, the Garland County Quorum Court will consider an ordinance to establish The American Rescue Plan Fund. Garland County is expecting $19.3 million. Hot Springs is expecting $10.8 million, which is 38% of the city’s $28.6 million 2021 general fund budget.
The Consumer Price Index is a measure of the average change in prices consumers pay for goods and services. In March, the CPI rose 2.6% from the previous March, said Michael R. Pakko, the Arkansas Economic Development Institute’s chief economist and state economic forecaster. March’s increase translates to a 7.7% annual rate.
“The other major price index, the Personal Consumption Expenditures Price Index, has shown similar patterns,” Pakko said. Pakko said comparing current prices to last year can be misleading because, last year, inflation was low and prices for some goods and services declined.
“Take gasoline prices for example,” he said. “Gasoline prices in Arkansas rose by over 80% between April 2020 and April 2021. However, gas prices had fallen by nearly 35% during the first four months of 2020. So the comparison of April 2021 with April 2020 shows a huge increase in price, but that would be a misleading measure of ‘inflation’ defined in terms of longer-term trends in prices.”
“The underlying seeds of accelerating inflation, in the form of plentiful liquidity in the economy, are evident,” Pakko said. “The Federal Reserve has adopted a new policy that seeks to allow inflation to exceed its 2% target for some time to make up for low inflation last year. Concerns about longer-term, accelerating inflation are being downplayed by many economists and policymakers. [They say] recent price pressures are supply-related, or due to temporary surges in consumer spending associated with pent-up demand.”
“The one clear lesson from history is that ongoing inflation, whether it starts as a cost-push or demand-pull effect on prices, can only become embedded as a trend when the public loses confidence in the monetary authority’s ability or willingness to restrict the growth of liquidity in the economy,” Pakko said.
“And when inflation expectations become untethered, it becomes all the more difficult to take the policy actions necessary to contain it. That’s where we were 40 years ago. I hope we don’t see a replay of the late ’70s and early ’80s, but I am concerned that the conditions are ripe for a similar scenario. … No one has seemed very interested in thinking about the longer-term consequences of recent policies and economic conditions. The concern has been all about getting through the pandemic.”
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