Everything is expensive these days, but is there any hope that once supply chain issues are resolved they’ll get much cheaper? Not really.
“Typically when those prices go up they do not come back down very easily at all,” LSU Economist Dr. Jim Richardson told WWL.
Richardson explained that the CPI (Consumer Price Index) doesn’t really budge once it hits a certain point, even if some individual commodities like oil or food fluctuate up and down.
These soaring prices have the full attention of the Fed and other economic entities. Inflation has all but evaporated most of the pay raises that workers saw post-COVID, and has hit the highest levels seen in decades.
That’s why interest rate increases are on the way, though Richardson cautions that he doubts they will be too aggressive. While those rate hikes will likely slow future inflation Richardson said the inflation that’s already hit us is baked into the system now via new, higher price floors for goods and services.
“The rate of inflation, it can be tempered and lowered, and that means you will not have further inflation but you will not have a reduction in overall prices at some time in the future,” said Richardson.
That means if you are holding out for the chip shortage to be resolved to go buy a car at prices closer to pre-pandemic levels, you may be out of luck. New car prices are up nearly 12% year to year, while used car prices have risen nearly 40%. Even if supply moves closer to demand Richardson said dealers don’t really have an incentive to sell at prices much lower than they are now.
“The car dealers will say we don’t need to lower the price, we don’t want to, because the market is out there willing to buy it,” said Richardson who added there may be some price reductions from the current levels, but likely not significant ones.