Inflation rates may drop to 3.1% annually from a peak of 9.1%, but this means that price increases are slowing down, not reversing.
Federal Reserve Policy
The Federal Reserve’s policy aims to keep inflation at 2%, not to allow general prices to fall for an extended period.
Impact of Rapid Price Increases
Despite overall prices rising by 19% since February 2020, some goods have increased much faster while others have decreased.
Inflation and General Prices
Although the inflation rate is decreasing, general prices typically rise over time and only fall when there is a disruption in the economy.
Federal Reserve Tools
The Federal Reserve influences the inflation rate by manipulating money markets and buying and selling hundreds of billions in securities, affecting the interest rates one pays when borrowing money.
Impact on the Economy and Consumers
The lack of price decreases may lead many Americans to feel pessimistic about their financial situations and the economy, despite overall economic improvement and rapid wage increases.
Impact on Different Prices
Despite rising overall prices, there are some goods that have significantly increased, while others have changed little and some have decreased.
Federal Reserve Intervention
In the past, the Federal Reserve has intervened when there is a risk of price declines, by injecting liquidity into financial markets or making money harder to obtain to reduce demand for products and services and achieve a decrease in inflation.
Future Prices
Although general prices are rising, that does not mean there won’t be occasional discounts. Some prices may have risen significantly, while others have decreased and some have remained stable.
Source: https://www.investopedia.com/why-prices-are-probably-never-going-back-down-8418157
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