Shelly Englander, 72, a retiree in New Jersey, said she gets “annoyed” every time she visits the local grocery store.
“When a senior citizen has a few items in a cart and it costs 90 dollars, there’s something wrong,” she told Xinhua.
This refrain has been heard over and over again, from coast to coast, among multiple ethnicities and age groups, over the past two years.
HIGH PRICES HERE TO STAY
While U.S. inflation shows signs of slowing, it looks doubtful that prices will return to pre-COVID levels anytime soon — to the chagrin of consumers nationwide.
Unrestrained government spending and events worldwide have caused inflation — especially food inflation — to rise at a rapid clip over the past two years.
Those in lower income brackets, as well as individuals on fixed incomes, such as the elderly, are feeling the sting.
Nowadays, it’s common for strangers to engage in conversations in the poultry aisle, bemoaning the high prices of chicken, not to mention other foods.
Desmond Lachman, a senior fellow at the American Enterprise Institute and a former official at the International Monetary Fund, told Xinhua, “Even though I expect that by the middle of next year inflation will come down to the Federal Reserve’s (Fed) 2 percent inflation target, it is highly improbable for us to return to 2019 price levels in general.”
“For food prices to do that, we would need the Russia-Ukraine war related grain supply side issue to be resolved,” Lachman said.
Dean Baker, senior economist at the Center for Economic and Policy Research, told Xinhua, “Prices almost never fall. Wages are up more than 20 percent since 2019. Why would anyone think that prices would fall back to their 2019 level?”
FEDERAL RESERVE POLICY
The good news is that inflation seems to be on a downward trend, as seen in Tuesday’s consumer price index.
That means the Fed could slow the most aggressive rate hike cycle in decades.
Tuesday’s report “gives the Fed every reason not to raise interest rates at its December policy meeting,” Lachman said.
Another reason the Fed could put the brakes on rate increases is the commercial real estate sector.
That industry has been hammered by the work-from-home trend that has remained in place long after COVID, as well as by lack of demand.
These problems could cause considerable strain in the financial system when loans start defaulting in a big way next year, Lachman said.
“This makes me believe that the Fed is done with this interest rate hiking cycle and that the Fed will be forced to cut interest rates next year to revive a weakening economy,” Lachman said.
Many economists and U.S. financial media believe rates will remain unchanged at 5.25 percent to 5.5 percent, and that next month’s Fed meeting will not see any hikes.
However, some central bank officials have suggested the possibility of another increase.
Earlier this month, Fed Governor Michelle Bowman said: “While I continue to expect that we will need to increase the federal funds rate further to bring inflation down to our 2 percent target in a timely way, I supported the Federal Open Market Committee’s decision … to hold the target range for the federal funds rate at the current level as we continue to assess incoming information.”
Some economists believe that any rate hike would not occur next month, but rather early next year.
Meanwhile, inflation continues to be a touchy subject in the lead up to next year’s race for the White House.
Source: Xinhua
