PITTSBURGH (KDKA) – No one likes rising prices, but as Americans returned to work last year and the recovery began, the cost of almost everything went up as well.
The inflation rate has hit its highest level in nearly 40 years.
Since 1992, the annual inflation rate has been around 3%, from 1 to 4% per year. But in 2021, inflation has hit 7%, the highest level since Ronald Reagan was president. And while economists expect it to drop this year, inflation will be no more in people’s wallets.
The consumer price index – or CPI – is the government’s way of calculating inflation.
“You can think of it as simply the average price of things that people normally buy, a typical household, so it includes things like gas prices, housing prices, food prices,” says Prof Antony. Davies, an economist at Duquesne University.
CPI’s 7% inflation rate was driven by energy costs rising more than 29% last year, while food prices rose 6%.
Davies said another big contributing factor – car prices, including used cars.
“What drives this is mainly the price of the car. They are up 40% since last year,” Davies told KDKA currency editor Jon Delano.
Most economists like Omair Sharif, founder of Inflation Insights, say the pandemic is largely to blame, creating supply chain problems overseas and at ports that drive prices up. And then there’s the bridge deck.
“Right now, there aren’t as many people flying as we usually see. Not many people go out to restaurants due to COVID. What they spend money on are durable goods. They are buying furniture. They’re buying TVs, things of that nature. And that also increases costs,” said Sharif.
Although the 2021 inflation rate is high, the trend may be better than it feels. December’s monthly inflation rate stood at 0.5 percent, down from October’s 0.9 percent. So what will 2022 be like?
“Over the next few months inflation will stay at 7% and by mid-year you would expect to drop to 4 and 4.5%. And by the end of the year, I expect we’ll be closer to about 3%,” said Sharif.
Whatever the rate of inflation, economists say don’t count on rapid wage increases to offset price increases.
“Wages will rise with inflation, but they tend to rise in a lagging fashion,” says Davies. “That is to say, we’re going to have inflation now and you feel it in your pocket because things are more expensive, and you don’t get a raise until next year.”
And see the Federal Reserve. Economists expect the Fed to raise interest rates at least slightly to combat inflation, which adds to the cost of credit cards or consumer loans.
https://pittsburgh.cbslocal.com/2022/01/12/economists-predict-highest-inflation-rate-in-40-years-should-ease-later-in-2022/ Economists predict 40-year high inflation rate to drop by end of 2022 – CBS Pittsburgh