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Investigating inflation: How will raising interest rates lower inflation?

Posted at 6:31 PM, Jan 26, 2022
and last updated 2022-01-28 13:05:15-05

KANSAS CITY, Mo. — For anyone who's following the stock market this week, they've noticed a lot of ups and downs.

And according to experts, such volatility has quite a bit to do with prices at the grocery store.

Once again, this comes down to a word many have heard frequently as of late: inflation.

Last week, the KSHB 41 I-Team consulted an economics professor at the University of Missouri-Kansas City. He explained inflation as "the increase or decrease (usually an increase) in the prices consumers are paying."

For most, inflation has become noticeable every week while buying groceries.

Unfortunately, that same expert the KSHB 41 I-Team consulted says the fastest way to stop the rise in inflation is actually to raise interest rates.

It's that possibility that has the stock market reacting wildly.

But how would paying more in interest rates help inflation go down?

"While that seems counter-intuitive, if we want to fight inflation, why do we want to increase the costs?" said Larry Wigger, UMKC economics professor. "But the idea is to get people to slow down, to take their foot off the gas, to stop spending as much money so there's a little less activity so we can get closer to the employment level that we're actually at now."

In other words, Wigger says if interest rates are higher, most people will spend less, and that will give the supply chain the time it needs to catch back up.

Remember, he previously explained this as something that's been building for years, even decades.

He describes it as a smaller workforce, meaning fewer people making the goods. Consequently, this means fewer trucks to transport goods along with a reliance on parts made overseas that experienced factory shutdowns during the pandemic.

As for how this is impacting individuals, the I-Team is tracking prices at five different stores across the metro.

This isn't so much a comparison about which store has the cheapest eggs or milk since the brands can vary as it is a cross-sample of what inflation looks like at a local level.

For example, this week here's a look at what a dozen eggs cost:

  • Hy-Vee in the Northland — $2.39. The good news is, that price hasn't increased since last week.
  • Olathe Walmart — $1.81. This price is holding steady since last week.
  • Aldi in Waldo — $1.35. These eggs are up 10 cents from last week.
  • Westport Sun Fresh — $1.79. This price is up 4 cents from last week.
  • Leawood Price Chopper — $1.69. Price Chopper's eggs also saw a 4 cent increase from last week.

KSHB 41 I-Team inflation tracking efforts are available online and on-air each Wednesday.

We want to hear from you on what resources Kansas City families might benefit from to help us all through the pandemic. If you have five minutes, feel free to fill out this survey to help guide our coverage: KSHB COVID Survey.

Tracking grocery prices

Starting on Jan. 17, 2022, the KSHB 41 I-Team is visiting several Kansas City-area stores to track the change in prices of a select basket of goods. You can see our shopping list below. On the left, you can see several graphics tracking the changing prices at each store. Some items are subject to sales on a week by week basis.