By most measures, the economy is running hot. But even the casual observer can’t help but notice a strong economy can come with a down-side. Inflation is becoming more and more obvious, as we fill our gas tanks and are alarmed by higher prices of everyday items like groceries. Inflation had been for many years an afterthought, but now it is getting more mainstream attention as we all keep an eye on inflation.
The U.S. Bureau of Economic Analysis’s August reading of the core personal consumption expenditures (PCE) price index — the Fed’s preferred inflation measure — was up nearly 4 percent year over year, the highest inflation in three decades. September’s consumer price index, the more familiar CPI, rose 5.4 percent compared to a year ago.
The price of many basic family goods is up much more than that. For households earning the U.S. median annual income of about $70,000, the current inflation rate has forced them to spend another $175 a month on food, fuel, and housing, according to Mark Zandi, chief economist at Moody’s Analytics.
It’s causing many to ask if inflation will stay elevated or head back down toward the long-term trend. Economic analysts at The Vanguard Group believe inflation dynamics will be volatile in the short-term. This is mostly due to supply shortages and other economic disruptions caused by virus-related shutdowns and the subsequent re-opening. However, Vanguard believes by the end of 2022 inflation will decline back to the 2.5 percent neighborhood.
What can we do to control inflation? The answer is, of course, not much.
You can improve your odds of long-term financial success, though, by working with the right advisor. An independent, fiduciary advisor, like Perspective Financial Services, will help you map-out, document, and stick to a disciplined plan to get you through uncertain times.