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Federal Reserve Chairman Jerome Powell speaks to the Senate Banking, Housing and Urban Affairs Committee, as he presents the Monetary Policy Report to the committee on Capitol Hill, Wednesday, June 22, 2022, in Washington.

Federal Reserve Chairman Jerome Powell speaks to the Senate Banking, Housing and Urban Affairs Committee, as he presents the Monetary Policy Report to the committee on Capitol Hill, Wednesday, June 22, 2022, in Washington.

WASHINGTON (AP) — As if their job weren't hard enough at a time of raging inflation, Chair Jerome Powell and his Federal Reserve colleagues have to do more these days than decide just how much to raise interest rates without triggering a recession.

They also have a sales job on their hands: Convincing the public that they will succeed in reducing inflation — now at 8.6%, a four decade high — to the central bank's goal of 2% a year.

And on Thursday, Powell told Congress that Americans do seem reassured, at least for now: Measures of consumer sentiment show that people generally think inflation will eventually subside.

"People do expect inflation to come back down to levels that are consistent with our price stability mandate," Powell told the House Financial Services Committee on the second of two days of testimony as part of the Fed's semiannual report to Congress. "But we haven't had a test like this. We haven't had an extended period of high inflation for a long time. So it's not a comfortable place to be."

If the Fed failed to reassure the public that it can curb inflation, many Americans would assume that prices were heading ever higher. Their likely responses — demanding increasingly higher wages or rushing to make purchases now before prices go even higher — could make inflation even worse.

Powell and the Fed are in the hot seat because inflation, which had been an economic afterthought for decades, has shot to the top of threats to the economy and concerns of American households. Average wages are rising, but not nearly enough to keep up with accelerating prices. On Thursday, committee members repeatedly reminded Powell that their constituents are feeling pain at the grocery store and the gasoline station.

Economists blame a confluence of factors for the inflationary surge. Fueled by super-low interest rates and vast government aid programs, the economy rebounded with surprising speed from the pandemic recession in the spring of 2020. Businesses scrambled to recall laid-off workers and buy enough supplies to keep up with soaring customer demand. The result was shortages of labor and materials, delays and higher prices. Russia's invasion of Ukraine drove energy and food prices even higher.

President Joe Biden's $1.9 trillion stimulus last year added heat to an economy that was already boiling, as many committee Republicans emphasized in Thursday's hearing.

After being slow to recognize the inflation threat, the Fed has been moving aggressively. Last week, it raised its benchmark short-term interest rate by three-quarters of a percentage point — its biggest hike since 1994 — and has signaled that more sizable rate hikes are coming. It also raised rates in March and May. Those rate increases will make it costlier for consumers and businesses to borrow, for homes, cars and other long-lasting goods.

The Fed is pursuing the high-risk challenge of gliding the U.S. economy in for a so-called soft landing — raising rates and slowing the economy enough to tame inflation without sending it tumbling into a recession. On Wednesday, Powell had acknowledged to the Senate Banking Committee that as the Fed drives rates higher, a recession remains possible.

"It's not our intended outcome," he said, "but it's certainly a possibility."

Reassuring the public that inflation can be conquered is critically important, Powell stressed Thursday.

"Inflation expectations are anchored," he told the House committee. "That's good, but it's not enough. We need to get inflation down because inevitably, over time, these expectations are going to be under pressure."

He repeated a pledge that the Fed would do whatever it takes to succeed.

"We can't fail on this," he said. "We really have to get inflation down to 2%."

In March, American consumer prices rose 8.5% from 2021, creating the sharpest increase in inflation since 1981. The average national price for gas climbed to an all-time high of $4.33 per gallon in March, driven partially by the ban on Russian oil imports after the country’s invasion of Ukraine. Grocery costs are similarly rising: According to the Consumer Price Index, the cost of meat, fish, poultry, and eggs has increased 13% since February 2021, while fresh fruit prices have gone up more than 11% during the same span. The cost of electricity has increased 11%, while furniture and bedding went up 16%.

With inflation quickly becoming one of the top news stories in 2022, it’s no wonder more consumers are wondering what all this really means for them. PennyWorks examined some of the most commonly asked questions about inflation and provided insight into how it affects the larger economy and your wallet. From the general causes of inflation (and why we’re seeing such high inflation right now) to its effects on earning power and loans, understanding these topics can help you better understand inflation—and how it impacts your finances.

First, a definition: Simply put, inflation is a decline in purchasing power over time. Inflation can be caused by a variety of factors. For example, it can rise in a hot economy where people have a lot of cash to spend and businesses must raise prices to keep up with demand for their products. However, supply chain issues like the ones we saw as the global economy rebounded from the COVID-19 pandemic in late 2021 can also lead to increased prices. Global conflicts such as Russia’s invasion of Ukraine can create shortages of goods like oil, which in turn cause gas prices to spike.

Inflation is rarely caused by just one factor, so economists and policymakers often have their own interpretations of what exactly causes it. Other possible explanations for the current spike in inflation include a shift in consumer spending, a historical underinvestment in infrastructure, corporate greed, recent government stimulus packages, and rising wages.

In the 1980s, high unemployment rates of more than 10% and a severe recession drove inflation down from the historic highs of the 1970s. Since then, inflation has largely remained stable and stayed within the Federal Reserve’s annual target inflation rate of 2%.

During the 1990s, the correlation between low unemployment and high inflation weakened, which forced economists to consider many other factors in the inflation puzzle. Some experts suggest that central banks adapted their monetary policy to combat spikes in inflation, which kept it stable for decades. Others believe workers’ power to advocate for higher wages fell with the decline of labor unions, which kept wage growth stagnant and therefore reduced inflation. The rise of the global supply chain and increased international trade also likely reduced consumer sensitivity to inflation.

Unfortunately, there is no quick fix for high inflation. The Federal Reserve has begun to raise interest rates, which will make it more expensive to borrow money and should reduce consumer spending. Some industries are beginning to recover from the snags in the supply chain that started in late 2021.

On the other hand, some experts are beginning to report that inflation is becoming more likely to stick around longer, pointing to signs like rising rents and home prices. Overall, many economists predict that inflation will likely stay above the Federal Reserve’s 2% target for the rest of 2021.

While paying higher prices for goods and services doesn’t usually excite consumers, not all experts believe that inflation is always a bad thing. Sharp rises in inflation—also known as hyperinflation—can destabilize economies, leading to hoarding of consumer products, losses of savings, and other societal issues.

Everyone can agree that hyperinflation is a problem, but more moderate increases in inflation are the subject of debate. Inflation can be a boon for small companies that can now charge more for their products, but at the same time, it negatively impacts lenders and people on fixed incomes. Similarly, inflation can help workers if it leads to higher wages, but hurt them if prices go up faster than pay.

If the prices of goods increase but your paycheck does not, inflation has effectively eroded your purchasing power. In other words, you can’t afford to buy as many products as you previously did.

For example, between September 2020 and September 2021, the consumer price index increased by 5.4%, according to the Bureau of Labor Statistics. Unless you were given a raise of 5.4% or more during that time period, the real-world value of your paycheck actually decreased. On the flip side, when inflation falls, your salary will go further, allowing you to buy more goods and services for the same dollar value.

When inflation increases, the value of cash decreases. That $10 bill can no longer buy you the same amount of groceries or gas it once could. If most of your savings are in cash, you’re effectively losing money over the long term as the power of the dollar diminishes.

In order to protect the buying power of your long-term savings, experts recommend investing in a diversified set of funds to help your money grow over time. Pay close attention to interest rates, as well. The rate hikes that the Federal Reserve has already set in motion should eventually increase the interest rates that banks will pay on savings accounts, in addition to the rates consumers pay on mortgages, credit cards, and other variable rate loans. It might not be worth sinking your cash into a fixed-term savings account with a low rate now if banks will be raising interest rates in the next year.

It seems like a simple solution to the problem of inflation: Just give people more money to make up for the buying power they’re losing. Unfortunately, the economy doesn’t work that way. Historically, printing more money tends to actually increase inflation because there is too much demand (through the new cash) for an unchanged amount of goods.

In other words, increasing the number of bills and coins in circulation would only devalue the U.S. dollar overall. Furthermore, the U.S. government isn’t actually in charge of printing money—our central bank, the Federal Reserve, is. The Federal Reserve operates independently from the federal government in order to safeguard monetary policy from political pressures.

Every inflationary cycle is different. Increased demand for a certain product—like the hunt for toilet paper in the first days of the COVID-19 pandemic—could lead to a spike in prices in that industry. Or, conversely, disrupted supply chains could cause inflation to increase. Think about the computer chip scarcity that is contributing to the current shortage of new cars and, in turn, sky-high car prices. Industries that tend to experience the first effects of inflation include energy, utilities, real estate, and consumer staples.

Inflation often hits companies with large inventories, such as retail stores, particularly hard. When the cost of goods increases, it usually goes up at both the wholesale and retail level. That means that stores have to replace recently sold inventory with new products that come with higher price tags from wholesalers, which eats into profits. Small businesses also often suffer during inflation, as suppliers often favor larger companies in moments of high demand. Since small businesses usually buy smaller quantities of raw materials or wholesale products, they also have less leverage with suppliers.

It depends on what type of loan you have. If you’re making payments on a fixed-rate loan, inflation can actually improve your financial situation in certain circumstances. Because your interest rate on a fixed-rate loan doesn’t change with market fluctuations, the value of your loans actually decreases as inflation rises and the value of the dollar declines. However, you’ll only come out on top if your wages rise at the same rate as inflation.

Conversely, as the Federal Reserve raises interest rates to combat inflation, the interest rates on variable rate loans will also rise, increasing the amount of your monthly payments. Federal student loans, personal loans, and auto loans typically have a fixed rate. Credit cards, personal and home equity lines of credit, and private student loans often have variable interest rates. Mortgages can have either a fixed or adjustable interest rate; check your account to see which type you have.

This story originally appeared on PennyWorks and was produced and distributed in partnership with Stacker Studio.

Copyright 2022 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

If you know of local business openings or closings, please notify us here.

· Surgery Center of Pottsville in Schuylkill County to close after June 28, 2022

· Terrain on the Parkway offers 160 new 1-, 2- and 3-bedroom apartments at 1625 Lehigh Parkway East in Allentown. Other amenities include a club room, fitness center, conference rooms and package lockers. Monthly rent starts at $1,575 with three-bedroom, two-bath units starting at $2,540.

· The former site of the flagship Hess's department store will soon be home to another company with local roots. Lehigh Valley native Don Wenner is moving his real estate investment and finance firm DLP Capital from Bethlehem to Allentown at 835 W. Hamilton St.

· While Wells Fargo has been the leader in closing banks lately, it will hold a ribbon-cutting for its new downtown Allentown office at 740 Hamilton St. on June 30.

· If you're in the market for sterling silver jewelry, minerals and semi-precious gemstones, C& I Minerals is now operating at the South Mall at 3300 Lehigh St. in Allentown.

· The Allentown-based utility company PPL Corp. has a new approach after making two big transactions. It sold its U.K. operations, taking a lot of risk and currency complications out of its business, and bought a major Rhode Island utility.

· Ownership at Martellucci's Pizzeria in Bethlehem has changed, but the nearly half-century tradition there continues. Paul and Donna Hlavinka and their family are running the pizza place at 1419 Easton Ave., just as it has been operated for 49 years. 

· Dr. Jacob Kasprenski's father and grandfather were both physicians in the Lehigh Valley, and now he's following in their footsteps of serving the community. His new Kasprenski Family Eye Care opened at 1088 Howertown Road, Catasauqua.

· This longtime downtown Easton lunch spot closed early in the COVID-19 pandemic, but it could be making a comeback. A plan to split the space with a vegan deli did not work out, but a June 13 Historic District Commission meeting approved a request for a new sign at Josie's at 14 Centre Square. 

· Zekraft cafe has opened its second location in the Easton Silk Mill in Easton. The first Zekraft restaurant was opened in Bethlehem. The restaurants' menus change frequently, with a focus on local ingredients. 

· Manta Massage at 319 Main St., Emmaus, will hold its grand opening on July 10 starting at 11 a.m. Services offered include facial cupping, and massages including targeted warm Himalayan salt stone and targeted facial massage.

· The former Iron Lakes Country Club, constructed in the late 1950s and early 1960s, will operate at 3625 Shankweiler Road in North Whitehall Township under its new name, The Club at Twin Lakes. The Jaindl family purchased the golf course last year, and worked with KemperSports Management to upgrade it. 

· Prologis, a titan in the logistics industry, is the choice of Air Products and Chemicals to own and operate three warehouses proposed in Upper Macungie Township. The industrial gas company said Prologis will use some of the former Air Products headquarters campus at 7201 Hamilton Blvd. for the warehouses, totaling about 2.6 million square feet. 

· Lehigh Valley Health Network ceremonially opened its first Carbon County hospital — a $78 million, 100,578-square-foot facility that officials billed as a "full-service community hospital." It's located at 2128 Blakeslee Boulevard Drive East in Mahoning Township.

· Pocono Township commissioners voted to approve a plan to build Pennsylvania's largest solar field on a mountain slope, despite pleas by some residents to reject the project for environmental concerns. Commissioners voted 4-1 to accept Swiftwater Solar's preliminary final plan for the $111 million, 80-megawatt field on a private 644-acre site on top of Bear Mountain that would include about 200,000 solar panels.

· Firetree Ltd., which is based in Williamsport and operates treatment centers for people with drug and alcohol addiction and other clients transitioning out of prison, wants to expand its in-patient rehab operation at the former Sands Ford auto dealership at 440 N Claude A Lord Blvd. (Route 61), Pottsville. To do that, it needs the Pottsville Zoning Hearing Board's approval regarding the use of the land.

· A Dunkin' in Schuylkill County has become just the fourth location of the donut and coffee chain to go entirely digital. The remodeled store at 400 Terry Rich Blvd., St. Clair, has replaced its traditional order counter with two in-store kiosks at which customers place digital orders and pay using a credit card or Dunkin' gift card.

· The Conservatory music school in Bucks County will close after 34 years, and school officials say the COVID-19 pandemic is the cause. The nonprofit, located at 4059 Skyron Drive, Doylestown, will close June 30.

· A Popeyes Louisiana Kitchen and Arby's will be built on the site of the former Ahart's Market on Route 22 in Phillipsburg, New Jersey.

· Hunterdon County Chamber of Commerce offices and the Unity Bank Center for Business & Entrepreneurship will be located at 119 Main St., Flemington. The building was erected in 1847 and was once the home of George Hall Large, who served as president of the New Jersey state Senate.

· Honeygrow opens Quakertown location, next to Chipotle on Route 309, on June 3.

· Dunkin' reopens remodeled restaurant at 1174 MacArthur Road in Whitehall Township

· Muse Modern Med Spa at 325 Fifth St. in Whitehall Township  will hold a grand opening June 4.

· Around Again, a consignment store, opened at 154 S. Main St., Phillipsburg

· Steak and Steel Hibachi, a restaurant in the works at 44 W. Walnut St., Bethlehem, still plans on opening late this summer. 

· Take It Outdoors Recreation Hub has moved to a spot along the Schuylkill River Trail at Riverfront Park in Pottstown, Montgomery County

· Pedego Electric Bikes has a new outlet in Lambertville, N.J. at 13 N. Union St.

· Amanda Vachris has opened a new Keller Williams Real Estate office at 15 St. John St. in Schuylkill Haven.

· Easton's new West Ward Market will open Wednesday and be open on Wednesday's through the summer from 3 p.m. to 7 p.m. The market, created by the Greater Easton Development Partnership, will sell fresh produce on 12th Street, next to Paxinosa Elementary School.

· Ciao Sandwich Shoppe is adding a second location, this time on College Hill in Easton. Ciao plans to open at 325 Cattell St. in late summer. Ciao already operates in downtown Easton at 12 N. Third St

· Ma's Crepes and Cakes will hold a grand opening and ribbon-cutting June 16 at 46 W. Broadway, Jim Thorpe. The celebration starts at 5 p.m., with the ribbon cutting at 5:45 p.m. 

· Bethlehem's Back Door Bakeshop will reopen as a wholesale operation at 7 E. Church St. in the city's historic district. The business was open for nine years as a retail outlet at Broad and Center streets, before announcing in March that it would close the storefront April 3 and "go back to its origins as a wholesale business."

·The Beef Baron on Catasauqua Road in Bethlehem is closed indefinitely for renovations

· The Brothers That Just Do Gutters are opening a new location in Allentown at 1302 N. 18th St.

· St. John Chrysostom Academy, an Orthodox school serving grades 1-9 starting this fall, held a grand opening at its St. Francis Center, Bethlehem, campus.

· Easton Commons, a shopping center anchored by Giant Foods at 2920 Easton Ave., Bethlehem Township, has a new name: The Shops at Bethlehem.

· Carbon County is getting a taste of Brazil at Uai Brasil BBQ at 315 Lehigh Ave. in Palmerton.

· The Keystone Pub in Bethlehem Township, at 3259 Easton Avenue, has reopened after a lengthy and expensive renovation. 

· The Trading Post Depot opened at 401 Northampton St., Easton. The rustic furniture store makes custom tables for dining rooms, desktops, conference centers and more.

· The Easton area has a new gym: Homemade Fitness at 444 Cedarville Road in Williams Township.

· Il Gaetano Ristorante opened at its 665 Columbus Ave., Phillipsburg, location. 

· Ciao! Sandwich Shoppe to open second location on College Hill in Easton, replacing The Kettle Room

· Rene and Grisellies Benique have opened Ezekiel 47 Cafe at 10 S. Fifth Ave., off Fifth and Penn avenues, in West Reading. 

· Alter Ego Salon and Day Spa in Emmaus is holding a grand opening Sunday, May 22, from 11 a.m. to 3 p.m., with a ribbon cutting at noon. 

· Origen Latin Fusion has opened at the site of the former Tomcat Cafe in Sinking Spring, Berks County. 

· Sellersville Senior Residences will hold a ribbon-cutting ceremony May 24. The Bucks County affordable-housing community for adults 55 and older has 50 apartments, with eight allocated for people with behavioral health needs.

· The House and Barn in Emmaus has opened its Shed outdoor dining and cigar bar area. The House and Barn is at 1449 Chestnut St. in Emmaus.

· Realtor Amanda Vachris and the Schuylkill Chamber of Commerce will hold a ribbon cutting at Vachris's new Keller Williams Real Estate office at 15 St. John St., Schuylkill Haven, at 4 p.m. on May 24.

· Il Gaetano Ristorante will hold a grand opening on Friday, May 20, at 5:30 p.m. The 665 Columbus Ave., Phillipsburg.

· First Commonwealth Federal Credit Union will hold a grand opening at its new headquarters in Trexlertown, 6126 Hamilton Blvd., on May 18.

· Vinyl Press Signs & Graphics has relocated within Emmaus. The new site is 15 S. Second St., not far from the former Sixth Street location.

· Pedro's Cafe in Emmaus to close

· SV Sports (formerly Schuylkill Valley Sports) to close Quakertown location

· Flemington DIY will host a Grand Re-Opening on May 14 at 26 Stangl Road, Flemington. The celebration will kick off at 10 a.m. 

· Elpedio’s Ristorante at Seipsville opened at 2912 Old Nazareth Road in Easton. The restaurant is open Wednesday through Sunday.

· Uai Brazil opened at 315 Lehigh Ave, Palmerton, offering both a seated or buffet option. 

· Colombian Mex Restaurant opened at 107 E Union Blvd in Bethlehem, offering traditional Colombian cuisine. 

· Precision Ink opened at 161 W Berwick St. in Easton. 

· King Wing opened a location in Bethlehem at 129 E. Third St., serving wings and sandwiches.  

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