We know the reasons: labor and product shortages have resulted in increased prices for such goods, such as used cars, as well as strong consumer demand.
As incentives ease, supply chain constraints are gradually improving. But economists believe it will take time until the data starts to look better.
When will pandemic inflation really start to subside? And by then how high will the prices go up?
Know here why inflation will remain high in 2022
Economic forecasting is tough, especially in something out of the ordinary like a pandemic. Experts are unsure whether the US has yet reached the peak of current inflation. Some predict it will take the first few months of 2022 to get there, which means prices will rise further.
While the December data shows inflation has slowed compared to the decline, the one-month trend does not, nor does it move the needle for the 12-month data.
Wells Fargo economists expect inflation to continue rising as it started this year. “Residential rents are likely to be a big driver in the inflation data, and supply chain disruptions will take longer to address,” he said in his January outlook.
But inflation is not likely to rise as high as it was that year in the early 1980s, when it was above 14%. Whereas Pandemic price hike. faster than As we have seen in decades, they are not as bad as they were then.
Wages rose last year as businesses tried to retain and attract workers amid pandemic shortages. These high salaries, especially for low-paying jobs, will not end in 2022.
And while energy costs eased in December amid an Omicron boom and monthly inflation numbers took some heat off, economists believe that could reverse in 2022.
“The Omicron version represents a new setback for the supply side, although it may only last for one to two months. Still, the virus adds to production challenges, forcing many people to become ill and for others. for, further delays the return of labor force,” Bank of America economists said this week. “Inflation pressures are likely to remain strong in the near term.”
These trends do not mean that inflation will continue to climb, but they do set a floor for the level at which inflation can fall.
What is stopping inflation from getting worse?
Multi-decade high levels of inflation bring back memories of the 1980s high inflation, But economists do not believe that we are on track to reach those heights again.
Economists also believe that demand has increased The reopening feature of the pandemic will eventually come to an end.
Meanwhile, the supply chain challenges that have defined 2021 are not getting worse and are expected to improve gradually this year.
With the Fed’s action, this should take some of the heat off prices. But timing remains the biggest question mark.
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