Inflation has been a big topic in finance and politics lately. You may have noticed that things are getting more expensive when you go to buy them. For example, the price of eggs went up by almost 60% in 2022 because of a bird flu outbreak. The pandemic also caused problems with supply chains worldwide, leading to higher prices. Other reasons for inflation include labor shortages, increased demand from consumers, and changes in oil supply due to the war in Ukraine. All of these factors have contributed to the recent inflation we’ve seen.
The good news is that inflation might be slowing down. In May, the consumer price index, which measures inflation, was 4% higher than it was a year ago. This suggests that prices might not be rising as quickly as before. The Federal Reserve, which is the central bank in the US, aims for an annual inflation rate of 2%, but it has been difficult to achieve that goal because of the factors I mentioned earlier. Even though we’re not quite at the 2% target, the current trends in the consumer price index indicate that inflation may be slowing.
One way to slow down inflation is through monetary policy, which is controlled by the Federal Reserve. This policy involves managing the supply of money and interest rates. If you’re thinking about buying a home or taking out a loan, you may have noticed that interest rates are higher than they used to be. This is because higher interest rates can reduce spending and put downward pressure on prices. Businesses may then lower the prices of their products, which helps decrease inflation. The same goes for any business that carries debt and buys or sells goods and services.
When planning for retirement, it’s important to consider inflation. Over time, inflation can reduce the value of your income and assets. It’s a good idea to think about how you can protect yourself from this erosion. If you need help with retirement planning, you can reach out to one of our financial advisors for a complimentary review of your finances.
- Why inflation hit these 10 items hardest in 2022 (cnbc.com)
- Here’s the inflation breakdown for May 2023, in one chart (cnbc.com)
- Inflation and Interest Rates Relationship Explained (investopedia.com)
- Mortgage demand surges higher as interest rates fall (cnbc.com)
- The 30-Year Mortgage Rate Increases | June 22, 2021 | Money
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