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When will the price increase end? probably never

New York (CNN Business)A dollar is no longer worth what it once was.

At the grocery store, it's about 11 cents cheaper than it was just a year ago. That $1 saves 15 cents on utility bills and 6 cents off rent and housing. It makes for a pretty decent chunk of change.

It also explains whyinflation is currently a top concern for Americans as prices rise across the board.
Inflation is about as high as in the early 1980s. That was 8.5%, according to the Bureau of Labor Statistics' latest report for July, but it would have been higher had it not been for the decline in gas prices.

So when will the price increases end? The answer is probably never. But that's not a bad thing, as long as the rate of climb isn't too high.

The United States is not alone in facing this problem. Average annual inflation in the first quarter of this year was at least twice as high as it was last year in nearly every developed country in the world.
People around the world are facing tough decisions about how to extend their paychecks. After adjusting for price increases, wages and salaries fell 3.5% over the past year.

Why inflation is good

Inflation will never end. And in fact we don't want it to end completely.

The Federal Reserve, the US central bank tasked with keeping inflation down through a series of rate hikes, is aiming for a target of around 2%. That means prices will still go up, but not by much.

When people say inflation is easing, that doesn't mean food is getting cheaper. Entering a period of deflation is extremely rare, and governments want to avoid it if possible. This is usually an indication that the economy is cooling rapidly.

Yes, inflation will go on for a very long time, but I wouldn't worry too much about it. From early 1991 to the end of 2019, year-on-year inflation averaged around 2.3% per month. These are the ideal increases, the kind that can keep up with the rising cost of living, the "in my day soda costs a nickel" kind of increase that will only become apparent over a long period of time.

Of course, that doesn't mean some prices won't go down. For example,gas prices have fallen significantly over the past two monthsfood prices may also fall. Food and gas prices are more volatile than other costs as they are affected by external factors such as supply chain issues and Russia's war with Ukraine. The Federal Reserve cannot do much to control them and tends to swing in both directions.

But for the most part, commodity prices remain high and Consumers won't feel relief until wages catch up with new prices.Nick Rusanov, a professor at Wharton Finance, said there has been no deflation in core goods, excluding food and energy, in the past 40 years. Prices for durable goods and services such as automobiles, electronics, and education rarely fall.

The Fed is now trying to reduce the time it takes wages to catch up with these new prices. The longer it takes for that to happen, the more likely Americans are to run out of savings or incur credit card debt. debt soared by $100 billion (13%). This is his biggest increase in over 20 years.

Reasons for optimism

Inflation at its current pace will not last forever. Most economists expect interest rates to fall to a target rate of 2% by 2024. Buying Bread from a Wheelbarrow We Learned in History ClassThe Inflation CrisisNo one cares about hyperinflation, at least in the United States.

That's not to say that high inflation won't last for a while.

Some economists believe inflation could rise slightly from 3% to 4% for decades. Baby boomers are retiring and birth rates are declining.Former British central banker Charles Goodhartsays that it is squeezing the labor force and we are entering an era full of labor shortages, which means rising prices. I am interested in this theory. San Francisco Federal Reserve Bank Governor Mary Daly said immigration restrictions may need to be revisited to solve the problem.

Historically, inflation has been rising for a long time in the United States, but monetary policy has changed since then. During that same decade, the central bank had multiple purposes. High production, employment and price stability. Today, the Fed tends to prioritize price stability over other obligations. That means Fed Chairman Jerome Powell is on a mission to raise interest rates until inflation falls, even if the economy falls with it.

Global Crisis

US Likely Safe from Hyperinflation: Sure, Prices Are Rising, But Unprecedented Instead, it eased last month.

Still, other countries are suffering. Argentine inflation is over 70%, her highest in 20 years. The country's central bank has raised its key interest rate to 69.5%, he said, in an attempt to curb inflation. Meanwhile, Turkey's annual inflation ratereached almost 80% in June. This is the highest level in about 20 years.
Long-term price increases tend to plunge some countries into periods of instability,resulting in higher global food and gas prices. 88} It will have a more severe impact on developing countries and, according to a United Nations report, could reverse progress in combating climate change over the past decade.