Why Prices Could Remain High Even as Inflation Declines
Written by
Mehedi Hasan Shoab
Edited by
Cory Dudak
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Everything from groceries, gas, airline tickets to even rent is more expensive than it used to be, and many Americans are wondering when prices will return to “normal.”
Obviously, these are heavily influenced by a number of factors influencing today’s record-high inflation, and there are differing perspectives on how most of them will play out. Inflation, however, has recently been on the decline. According to the latest Consumer Price Index numbers, prices rose 6.5% from December 2021 to December 2022, which is still a slight improvement from a June 2022 surge when prices rose 9.1% YoY.
The recent slowdown, largely due to lower fuel prices, is a significant step in the right direction. However, the United States is still a long way from the Federal Reserve’s long-term goal of 2% annual inflation, and the bad news is that high prices for many goods and services are likely to persist for some time.
To protect against unexpected rises in prices, many businesses have long-term contracts that set the prices they pay to operate their businesses months in advance, from purchasing ingredients to shipping goods worldwide. This means that lower freight and commodity costs will not be passed on to consumers immediately.
Increasing prices are caused by more than just supplier contracts. Hiring labor has become more expensive for businesses that require numerous employees but have had difficulty finding them.
This is why consumers are becoming pickier about where they spend their money. Although this might become frustrating, they are not completely powerless. If consumers become financially conscious, that’ll go a long way toward persuading businesses to stop raising prices and even provide a discount.
This is why consumers are becoming pickier about where they spend their money. Although this might become frustrating, they are not completely powerless. If consumers become financially conscious, that’ll go a long way toward persuading businesses to stop raising prices and even provide a discount.
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