Over the past year, American inflation has dropped from 9% to 3%.
In August, Dr. Jeremy Siegel, Wharton professor emeritus of finance, expressed confidence the United States will not face a surge in inflation despite recent efforts to tighten monetary policy.
But will consumers see financial relief from higher costs?
Inflation and prices
Unfortunately not, according to Dr. David Mitchell, professor of economics and director of the Bureau of Economic Research at Missouri State University.
Inflation and changing prices are often confusing concepts intertwined in public perception. Inflation is the rate at which prices fluctuate; it does not correspond to prices decreasing. So, as inflation drops, prices do not change, but the rate at which prices increase will reduce.
“Prices are going to stay permanently fixed at this elevated level and they are not coming back down because that would be called deflation. We are not going to be experiencing that,” Mitchell said.
What factors affect the rate of inflation?
While the inflation rate is dropping, Mitchell is not convinced it is reducing fast enough.
He notes that inflation is heavily influenced by expectations.
The challenge arises when…