On Wednesday’s broadcast of West Virginia MetroNews’ “Talkline with Hoppy Kercheval,” Federal Reserve Bank of Richmond President and CEO Tom Barkin said that when there was inflation a year ago, “people had money in their pockets.” But now, middle and lower-income people are “running out of money. They’re stressed. And they are absolutely trading down.” And inflation isn’t being “masked” anymore.
Barkin stated [relevant remarks begin around 4:40] that he expected to see people change their consumption habits in response to inflation a year ago, “but, as you know, there was a lot of stimulus, which put money into people’s pockets. And then COVID itself was kind of a stimulus because you couldn’t spend money on a certain set of things like getting a haircut. And so, you ended up spending money on goods. And so, when inflation first started, prices went up, but people had money in their pockets. And nobody liked it, but they shrugged and said, okay, I guess I can afford that. What’s happening now, I think, especially with middle and lower-income folks is they’re running out of money. They’re stressed. And they are absolutely trading down. … And so, that’s the kind of behavior you expect to see with inflation, and I just think it was masked for a time by the amount of money that people had in their pockets.”
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