Is inflation on the way out? Evidence suggests maybe so
Evidence suggests worst of inflation may be behind us
During the pandemic the workforce was sickened, which choked the economy. Remote work and massive government stimulus programs set off a consumer buying spree that inflated prices as demand overwhelmed supply. But the now inflated rates make consumers far less willing to spend. Evidence suggests we may have been through the worst of inflation.
OAKLAND, Calif. - Many people believe companies are using the cover of inflation to their advantage. They say they're raising prices for profit, calling it ‘greedflation.' But there is promising news that inflation is beginning to seriously abate.
As COVID sickened the workforce, it also choked the economy as the production, supply and transportation of goods nosedived. At the same time, remote working and massive government stimulus programs set off a wild consumer buying spree that inflated prices as demand overwhelmed supply.
Now, inflation and rising interest rates make consumers far less willing to spend.
"We're not thinking of buying another home. The grocery store; we're definitely cutting back on what we buy," said Alamedan Jennifer Patel. "I'm definitely not buying extra things. I'm a little bit of a minimalist, so I am probably not buying a lot of things anyway," said Alamedan Kathleen Mertz.
The actual evidence suggests that we may have already been through the worst of inflation. Preston Caldwell is Senior U.S. Economist for the $300 billion investment research and investment firm Morningstar, which forecasts a huge drop in inflation next year. "As these supply constraints resolve the spikes in prices that we've seen in various industries like energy and autos and others will actually unwind in impact," said Caldwell.
The president and consumer advocates say spiking prices are often "greedflation," where companies, blaming inflation, charge more because they can get away with it, without having to prove it.
"You could, to some extent, use that to explain the greedflation story, but it's really a minor contributor at best to the inflation that we're seeing," said Caldwell.
The good news, the fight against inflation seems to be working. "2.6% for next year on average and then even in 2024 getting below two percent," said Caldwell.
That's even better than where the Federal Reserve wants inflation to be. "I think the bulk of the inflation is behind us and that's why I think the fed being too tight is really very bad for our economy," said Professor Jeremy Siegel of the Wharton School of Business.
Morningstar projects rate increases should reverse mid to late 2023 or soon thereafter with an astonishingly low 1.4 percent inflation in 2024.