Has inflation reduction stalled out? Only partly:
Inflation in goods went to zero two years ago and has stayed there ever since. However, nominal wage growth continues to play catch-up with overall inflation—and since the price of services is driven largely by wages this has kept services inflation high. Eventually these two will come down in tandem and high inflation will be over for good.
How long will this take? Beats me. It took quite a while following the Reagan inflation, but that was a massively larger event than the pandemic. Maybe another year?
But the price of eggs!!!
The Biden administration did a great job in dealing the pandemic and the economy, all the while cleaning up the mess Trump left. That includes using the strategic reserve to keep gasoline prices from climbing through the roof. Unfortunately, no one was really touting that. The inflation spike hurt everyone, and there were parts of the country that were left behind. Hard to say things are good when people still feel pain--but they could argue that we've turned the corner. Trump never helped those communities and Biden's efforts will take years to fully show up--and Trump is trying to claim credit...
If Trump follows through on his pledge to raise tariffs and deport massive numbers of people, the answer is...not for the next four years, plus whatever time it takes for the next Democratic president to clean up the mess.
even just the tariffs. I've been buying a few things that were on my to get list before the Trump tax hits
Luckily it’s transitory.,,
yes it was.....
'Stalling out' in the low to mid 2's is the stated goal of the Fed.
Its weird to describe reaching your destination as 'stalling out'.
Hey mom, why has the car stalled out next to Grandpa's house? How long until we get un-stalled and keep moving?
You're deliberately excluding the likely scenario where Trump tariffs and deportations both go forward. In a different universe where Trump loses, inflation would surely fall below 2% in 2025.
In this world, there are too many variables to play out to know when inflation cools to 2%. We could have a recession caused by a broad price shock. Or we could see China resort to currency-fixing to offset tariffs, escalating the trade fight that eventually gives way to either a massive price shock or a trade agreement that stops the trade war. Or we could see the Fed step in and unintentionally trigger stagflation because the trade war keeps escalating even while economies are pushed into recession. Or we could just see the slashing of exports and imports resulting in the closer relationship between wage inflation and prices, putting us into a new normal where inflation holds steady between 3-4%. Or we could see inflation become so intolerable for the GOP that it challenges Trump on the trade wars and forces him to declare victory without actually winning anything. And so on.
Rest assured, if there is even modest inflation caused by the tariffs and deportations, companies untouched by these changes will raise prices and blame it on the tariffs and deportations. So, rather than slowing inflation, it's going to accelerate through 2025. We're not going to see a return to 2% until at least 2026, or maybe until after Trump is gone, or if Democrats settle on keeping Trump's tariffs, then, never.
Perhaps the chart should have gone back to circa 1980 then? https://fred.stlouisfed.org/series/FPCPITOTLZGUSA though doing so calls into question calling it the Reagan inflation since the spike appears to have been 1980.
"...though doing so calls into question calling it the Reagan inflation since the spike appears to have been 1980."
Calling it the Reagan inflation was complete nonsense. The inflation rate by year can be found here . Some values:
1976 4.90%
1977 6.70%
1978 9.00%
1979 13.30%
1980 12.50%
1981 8.90%
1982 3.80%
1983 3.80%
1984 3.90%
Looks like the Carter inflation to me. BTW Carter, like Biden, wasn't reelected.
OPEC-inflation, Volker recession, Volker recovery. External shock led the Fed Chair to send interest rates sky high, and then reverse in 1983. Reagan and Carter had almost nothing to do with it.
Also, there was still a fair amount of residual inflation from Vietnam War production. Unfortunately, Jerry Ford's "WIN" buttons didn't seem to do much.
The United States had withdrawn from Vietnam by 1973 yes?
Per the FRED link I posted:
1970: 5.83 %
1971: 4.29 %
1972: 3.27 %
1973: 6.17 %
1974: 11.05 %
1975: 9.14 %
1976: 5.74 %
1977: 6.50 %
While I have two of those "WIN" buttons, I don't recall when they were released. (I picked them up at an estate sale) Still, it seems that inflation was in decline during the Ford Administration (1974-1976).
Yes, we had withdrawn by 1973, but the inflationary effects don't just end that fast. The 1970's were an economic mess. Lingering effects of the war, Nixon mismanagement, oil price shocks, etc. Once inflationary expectations became entrenched, they were very hard to eradicate. I started a job in 1974. In the first year I got:
merit increase: 8%
two cost of living increases: 18%
total 26%
If the inflationary effects of Vietnam didn't end, how then did inflation drop like it did from 1970 to 1972?
Once again, the average voter doesn't give a shit about the current rate of inflation -- they care about price levels, what shit costs at the store now relative to the Golden Age of 2019 before Covid, when all was right with the world. Trump will have to do something to either massively deflate prices or massively increase people's disposable income, neither of which he can/will do, except maybe if you're a grifty crypto bro. Seeing whether people blame him for the shitstorm to come, or if the right wing media ecosystem can successfully spin everything as still Biden's fault or something will tell us a lot about whether these people are reachable or not.
The inflation rate does seem to have stalled at slightly over 2% but this a problem of the Fed’s creation. Instead of having a magical line, they should have a range as they do with interests rates. Anything between 1.5 and 2.5% should be viewed as in target and not necessitating Fed action. And yes, Trump policy proposals could well be inflationary, but he is usually full of bluster, let’s wait and see what he really does.
Walmart, and Lowe's Hardware, are preparing to raise prices. Most major retailers are likely doing the same. And The Convicted Felon has insisted that he'll use tariffs to eliminate the budget deficit, if not the debt. So, I'd wager the lizard part of his brain is fully driving him and we'll see tariffs within the first week.