Inflation accelerates to a 40-year high of 7.5%.
Surging inflation has been heaping costs on households and businesses, sending the prices of everything from gas to groceries up sharply. The Consumer Price Index data show that prices climbed over the past year more rapidly than economists expected. On a monthly basis, prices rose 0.6 percent.
A key inflation measure showed that prices are climbing at the fastest pace in 40 years and more quickly than economists had expected. Consumer Price Index data for January, released Thursday, showed that prices have climbed 7.5 percent over the past year, which is rapid, even by historical standards.
The Federal Reserve Bank of New York reports the median expectation among respondents is that inflation will be declining to an average annual rate of 3.5% across the next three years which will create a sense of hope for the economic future. The median expectation about the increase in home prices over the year above to 6% in January from 5.5% in December. The 2021 average became 5.4%.
While other sources expect inflation to get worse before it gets better citing that “[t]here’s only one proven way to stop inflation: Raise interest rates quickly and keep them there until inflation drops.” As Henry Olsen states in his recent opinion piece, the Fed continues to avoid this as it would cause asset prices to drop and depress economic activity. https://www.washingtonpost.com/opinions/2021/12/10/inflation-numbers-are-only-going-get-worse/
Forecasters mention the identifiable factors behind goods inflation—are primarily pandemic-related but the increasing vaccination rates and decreasing health risks should rebalance spending patterns, leading to a decrease in demand for goods and an increase in demand for services. As the economic rule book goes, if increases in the supply of services continues to lag behind increases in demand for services, inflation risks will continue to rise.
We are urging our small business and investor clients to batten down the hatches and use the 5-step anti-inflation protocol to combat these inflationary times.