Inflation and Omicron: Don’t Panic, Don’t Hoard, Experts Advise

 Inflation and Omicron: Don’t Panic, Don’t Horde, Experts Advise
Duke economists Emma Rasiel and Connel Fullenkamp

DURHAM, N.C. – The emergence of the new Omicron COVID-19 variant may actually help the U.S. economy by dulling rising inflation. But in the longer term, it may hinder the recovery of supply chain problems plaguing the delivery of goods around the globe, further taxing the economy, two Duke University experts said Tuesday.

Duke economists Emma Rasiel and Connel Fullenkamp discussed myriad issues related to inflation, the U.S. and global economy, and the impact of the new COVID variant during a virtual media briefing for journalists.

Watch the briefing on YouTube.

Here are excerpts:


Connel Fullenkamp, economist

“We usually think inflation is driven on the demand side, usually often times by excessive monetary policy, when monetary policy gets too loose.”

“In this case what we’ve got is both supply and demand factors going on. On the demand side of course we do have monetary stimulus in response in part to the pandemic and in part to ongoing monetary stimulus that’s been a part of the financial landscape for really over a decade or more.”

“In addition we had the massive fiscal stimulus that took place with the Biden administration’s response to the pandemic, literally trillions of dollars being spent and put into the American economy, families getting checks, businesses getting support for their employees and so on.”

“Between those two things we had an absolutely outstanding amount of aggregate demand being increased.”

“At the same time we have supply chain issues because all the goods and services can’t get produced or they’re in the wrong place to get into consumers’ hands.”

“At the same time we have had an unprecedented departure from the labor force. A lot of people have basically stopped working. In some cases, permanently. In some cases they’re waiting on the sidelines for things to get better.”

“So we have both supply and demand factors that both are moving in the direction that pushes prices up.”



Emma Rasiel, behavioral finance expert

“A lot of is about uncertainty and how difficult it is to plan when you don’t know how prices are going to change over time.”

“We saw a lot of hoarding and shortages last year when there were concerns about things like toilet paper and so on. So that was a pandemic-driven response. You may see something similar in an inflationary environment. For non-perishables, if people are worried the prices of those are going to go up a lot, and they’re essentials, people may stockpile them. Of course that has the impact of creating a vicious cycle as it becomes harder and harder to buy them.”

“If prices are going up on day-to-day essentials, employees will push for higher salaries because their cost of rent and food and other essentials is going up so they need more money to pay for it.”

“Companies will try to push at least some of those wage hikes into higher prices for consumers. Again, this creates a vicious cycle.”

“Many people in the economy today have not lived through a period of inflation. The last time we had significant inflation was back in the 1970s. So most people living and working today have always seen price levels stable with very small increases over time just as their salaries have gone up over time.”

“Dealing with a world in which prices are going up a lot and people don’t know how to think about it or plan for it will create even more uncertainty just in people’s day to day lives.”




“It’s going to give us a little bit of short-term relief from inflation. We’ve already seen markets reacting in a classic uncertainty mode. When markets go into an uncertainty mode, they start to plan for a worst-case scenario. They’ve actually assumed that demand for things like oil and other energy forms are going to go down. We’ve already seen the prices of some energy go down. That may give us some short-term relief.”

“The price of oil is down below $70 a barrel, where it was above $80.”

“But it may also prolong and postpone the eventual recovery of the supply chain. So I think there’s bad news for the longer term. We were hoping that the supply chain issues that were feeding some of the inflation would get resolved quickly. But with the rise of Omicron one of the things it could do is both suspend production in different parts of the world and continue to gum up the supply chain even worse.”


“From the demand side, if there are potential lockdowns or just slowing down of community activities … that could potentially put a little bit of a brake on inflation as people are purchasing less in certain sectors of the market.”

“What we saw in 2020 was this sort of bifurcation where certain types of companies that sold essentials actually had huge amounts of demand and prices went up, as well as companies in the technology space because they were responding to the enormous demand for technological services for people working from home.”

“On the other hand, there are other areas of the economy – transportation, entertainment – that did very, very poorly as people completely stopped making use of those kinds of goods and services. We may see a recurrence of that.”

“It creates this bipolar effect where some companies do absolutely fine and in fact can’t hire enough people, and other companies find themselves in significant difficulties.”




“If we do move into a more inflationary environment, higher interest rates unfortunately are absolutely inevitable. The level of interest rates drives borrowing.  If interest rates do go up a lot, it makes it harder for the consumer to borrow for items like buying a house, buying a car. If interest rates go up, people’s savings accounts, interest rates may go up but not as much as inflation goes up, so that somewhat depresses the value of people’s savings accounts. And then they worry about where they should invest that money.”




“There will be more supply coming into the market. Supply has not been able to keep up with demand. Supply of housing happens over a reasonably long timeframe. I think there will be more supply of housing. Demand for larger houses in the suburbs, that may soften in an inflationary environment.”

“Interest rates are going to go up, which will push mortgage rates up, which at the margin will slow down people’s demand for mortgages.”

“I don’t think a crisis of available places to live is absolutely imminent. If we do go into an inflationary environment, the recent upswing, upticking in housing prices across the U.S. will stabilize and that could be one of the benefits of this situation.”




“In real terms, the purchasing power of many families has actually gone down despite the fact they’ve received fairly significant wage increases. We have wage increases at a pace of 3, 3.5 percent which is really unusual for the past decade. A bout of high inflation that’s at 5 percent or 6 percent comes by and unravels that rather quickly.”

“It does the damage in exactly the places low-income families are most vulnerable. Energy prices increasing, we see rent prices going up, we see prices at the grocery store increasing.”

“Inflation is especially bad because it hurts the folks at the lowest end of the income distribution the most because they spend their money that are most vulnerable to inflation.”

“One of the things we’re really watching in the big picture is to see whether these costs of living adjustments we used to see … are going to make a comeback.”

“If those catch back on, the good news is that people will be better protected. The bad news is that tends to start to feed into what we call a classic wage spiral. Over long periods of time, it’s an unfortunate truth that wages never quite catch up to inflation, at least in the short term.”




“There have been an accelerated number of retirements. We’re talking really about a shortage of workers in the neighborhood of 5 million people, which is still a significant share of the labor force. A great number of those folks have decided to permanently retire.”

“A lot of people have taken this time of the pandemic and the lockdowns to rethink the kind of work they want to do. A lot of people are striking out on their own to start their own businesses, which on the one hand can be really good, but on the other hand these tend to be really small and don’t employ a lot of folks.”

“And we still do have lots of people who are for various reasons unable to return to the labor force. They’re still wary of going back to work and being exposed to the virus. A lot of people are being slammed by the lack of childcare or school situations and that is still preventing a lot of people as well.

“It’s a really interesting mixture. There’s no really great single policy prescription to get all these folks back to work.”


“Most retirees will tend to be using their savings in order to live during retirement. If we do go into a more inflationary environment, suddenly those savings are not going to be sufficient.”

“Inflation eroding the value of people’s retirement savings accounts may actually have the positive benefit at the margins of bringing some of those early retirees back to work because they realize their savings won’t be able to carry them through their expected retirement if inflation goes up.”




“One of the things that we would encourage people to try to do is to not panic. When life becomes very uncertain, people tend to become much more short-term focused. How are we going to get through the next few weeks or months rather than thinking about the longer term?”

“Don’t make dramatic changes to long-term retirement portfolios. Panic often has people coming out of more risky investments and putting it into savings.”

“Try to avoid the hoarding that we sometimes see of non-perishable essentials. If everybody goes out and buys in huge numbers, because they’re concerned about the prices going up, that will actually force prices to go up more.”

“An inflationary environment tends to feed on itself if people make panicked short-term decisions.”

“Inflation is self-fulfilling in many ways. If everybody believes there will be inflation, there will be.”

Faculty Participants

Connel Fullenkamp
Connel Fullenkamp is a professor of the practice and director of undergraduate studies in the Department of Economics at Duke University. He studies financial market development and regulation of financial markets.

Emma Rasiel
Emma Rasiel is associate chair and a professor in the Department of Economics at Duke University. She is also teaching director of the Duke Financial Economics Center.

Duke experts on a variety of topics can be found here.

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