THREE FACTORS THAT COULD CHANGE THE COURSE OF INFLATION
For the past year, supply-related problems contributed more to inflation than demand-related imbalances, but that may be changing soon. There are at least three factors that could change the course of inflation. First, the improvement in shipping and general supply bottlenecks could ease inflation. Second, strength in the U.S. dollar could offset some of the current inflationary pressures. And third, import prices have moderated since the beginning of 2022 and as import prices slow, we expect consumer prices to eventually reflect the slowdown in import prices.
WHAT WAS KEEPING INFLATION ELEVATED?
In recent months, inflation was lifted by supply bottlenecks, stimulus money, and loose monetary policy. As we navigate the uncharted waters of historically high global inflation, we can best understand the underlying trends by taking an individual look at the various components. Current inflationary reports are highly nuanced right now.