The US is going through unprecedented times, seeing record-high inflation rates. This is due to several factors, from supply chain issues, recession, and COVID.
Here, we're going to help outline inflation in the US, including the history of inflation and how that impacts you.
Inflation in the United States
First, let's start by examining inflation in the US. According to Trading Economics, the annual inflation rate in the US was 8.3% in August of 2022, the lowest it has been in four months but higher than market forecasts of 8.1%. Although inflation has dropped slightly from earlier this year (it hit a peak of 9.1% in June 2022), it’s still up more than a percent from the end of 2021.1
Inflation impacts everything we buy, but recently, the US has seen the most dramatic spikes in food prices. According to the US Bureau of Labor Statistics, the prices for food at home increased 13.5%, the largest 12-month percentage increase since the period ending March 1979. In addition, prices for food away from home increased 8% for the year ended August 2022, the largest over-the-year percentage increase since an 8.4% increase.2
What This Means as a Consumer
These staggering inflation numbers aren't limited to the US. We are seeing the impacts of increased inflation all over the world amid supply chain hurdles and labor shortages. But things seem to be slowing down a little after record-high inflation rates over the summer.
As a consumer, the biggest impact of these high inflation rates is that the cost of living will likely increase. Goods like food, gas, cars, and rent are increasing in cost all over the US.
We've already seen the US government increase interest rates to slow inflation. The US Federal Reserve voted unanimously to raise the interest rate paid on reserve balances to 2.4%.3
If borrowers need to pay more for the loans they get, such as for mortgages or car payments, or to start a business, they might be more hesitant to sign for that big purchase, which will lead to less economic activity and potentially slower inflation rates.
Economists all over the world are preparing for a recession and increasing interest rates is one way to fight rising inflation. We will see how these numbers impact the coming Q4 holiday season. For information on how to protect your assets and investments during inflation, feel free to contact our team, California Retirement Advisors, at cradvisors.com, or call at 888-643-7472 to set up an appointment to speak with an experienced advisor.
By Christian Cordoba
CERTIFIED FINANCIAL PLANNER™
Founder, California Retirement Advisors
For more information on inflation's effect on our economy, watch this video by Rodney Johnson
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