Inflation cost the average Minnesota household over $700 in April

On Wednesday, the Federal Reserve announced that it is raising interest rates in an effort to curb inflation. The Fed will hike rates by 75 basis points — or 0.75 percentage points, the country’s highest rate hike since 1994.

As reported by the New York Times, the Fed expects inflation to go down to 5.2 percent by end of the year. Certainly, 5.2 percent is still more than two times higher than the Fed’s usual target of 2 percent, so families will still feel a sting. On the other hand, it is also lower than the current annual rate of 8.6 percent.

But in the meantime, how much is high inflation costing you? Quite a lot, as it turns out.

According to the United States Congress Joint Economic Committee, in April 2022, the average Minnesota household paid $747 more in goods and services due to high inflation. This was the third-highest cost in the country, only surpassed by Utah and Colorado.

An extra $747 per month also means that the average Minnesota household would spend nearly $9,000 extra per year covering for inflation, that is only if price levels stay the same. But as we saw in the most recent update, inflation in May was up from April levels meaning that this number could possibly go up.

To put these numbers in perspective, according to the Minnesota Department of Employment and Economic Development, the median wage in Minnesota in the first quarter was $23.81. To make up for the cost of inflation — at $747 — a person earning the median wage would have to work, on average, an extra 31 hours a month or over three-quarters of a whole work week — assuming a 40-hour work week.

And for someone earning below the median wage, it would take significantly more than an extra 31 hours of work — depending on the level of earnings — to make up for the cost of inflation.

Milton Friedman was indeed right when he said that inflation is the cruelest tax.