When will price increases end? Probably never
At the grocery store, you’re getting about 11 cents less than you did just a year ago. That dollar covers 15 cents less on utility bills
So when will price increases end? The answer is probably never. But that’s not a bad thing, as long as the increases aren’t too high.
Why some inflation is good
Inflation doesn’t end, it just gets less bad. And, in fact, we don’t want it to end entirely.
The Federal Reserve, the US central bank tasked with lowering the rate of inflation through a series of interest rate hikes, is aiming for a target of around 2%. That means that prices will still rise, just not nearly as much.
When people say inflation is easing, they don’t mean that groceries are getting cheaper. They mean that they’re not going up as much each month. It’s very rare to enter a deflationary period, and the government likes to avoid it if possible as it usually indicates that the economy is cooling way too rapidly.
So yes, inflation will continue on for a very long time, but you won’t notice it as much. Between the start of 1991 and the end of 2019, year-over-year inflation averaged about 2.3% a month. Those are ideal increases, the kind that cost of living raises can keep up with, the kind of “in my day a soda only cost a nickel” increases that become obvious only over long swaths of time.
But for the most part, prices of goods will remain higher, and consumers won’t feel relief until their wages catch up to the new prices. Over the last four decades, there hasn’t been any deflation in core goods, which exclude food and energy, said Nick Roussanov, a professor at Wharton finance. Durable goods and services, like cars, appliances and education, rarely come down in price.
The reason for optimism
Inflation won’t continue at the current pace forever. Most economists predict that it will come down to that target rate of 2% by 2024.
That’s not to say that high inflation won’t stick around for a while.
There have been long periods of elevated inflation in the US before: In the 1970s the US economy suffered three recessions during which the underlying inflation problem never went away. But monetary policy has shifted since then. In that same decade, central banks had multiple objectives: high output and employment and price stability. Today, the Fed tends to prioritize price stability over those other mandates. That means Fed Chair Jerome Powell has a mandate to increase interest rates until inflation falls, even if the economy falls along with it.
A global crisis
The US is likely safe from hyperinflation: To be sure, prices are elevated, but not unprecedentedly so and they eased last month.