Iiiiittt’ssss baaack. We are talking inflation — U.S. consumer prices recorded their largest increase in 11 months in December 2017 bolstering expectations that inflation will accelerate this year.
WHAT IS BEHIND THE RECENT UPTICK IN INFLATION DATA?
Increases in demand and sales typically leads to rising prices:
- Housing rents.
- Car sales.
- Retail sales in December.
HOW DOES THE GOVERNMENT RESPOND TO RISING DEMAND AND PRICES?
Tapping the Brakes: The Federal Reserve is on course to increase interest rates to slow borrowing.
HOW DO ECONOMISTS VIEW INFLATION – WHAT IS TOO HIGH OR TOO LOW?
The Fed has a 2 percent target this year. Last year was just a bit under the target.
HOW SHOULD CONSUMERS RESPOND TO HIGHER INFLATION?
- Make bigger purchases now: car, appliance.
- Refinance your house if you have not done so in recent years.
- Consider investments that traditionally respond well relative to inflation: inflation-protected bonds, stocks, commodities, real estate.