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Consumers Feeling the Pinch of Inflation Should Be Feeling Relief Very Soon

Consumers Feeling the Pinch of Inflation Should Be Feeling Relief Very Soon

Consumer prices rose 6.8% for the 12 months ending in November, a 39-year high. Many economists expect inflation to remain near this level for a few more months but predict a moderate drop through 2022 for a variety of reasons. And they don’t see a repeat of the 1970s or early 1980s, when inflation ran above 10% for frighteningly long stretches.

Households could even see relief in some areas within weeks, according to the Biden administration. Prices have dropped on global markets for crude oil and natural gas, which is filtering into lower prices at the pump and for home heating. That should keep inflation somewhat in check, even if prices keep rising elsewhere in the economy.

 

Economists say inflation will likely stay slightly higher than it was in the final year of the Trump administration before the pandemic, even after it eases through 2022. More often than not in the last 10 years, inflation was below 2%, and it even scraped below zero during parts of 2015. The bigger danger then was too-low inflation, which can also lead to a weak economy.

But consumers are already seeing some relief where it matters the most. A gallon of regular gasoline has fallen about 2.4% over the last month, to a little less than $3.35 per gallon on Friday, according to AAA. That’s progress, though drivers are still paying slightly higher prices than last December when a gallon of regular was only $2.16. That doesn’t take into account that people were also driving less one year ago than they are now, as vaccines hadn’t yet been developed and Americans stayed home instead of traveling for the holidays.

The U.S. Energy Information Administration forecasts gasoline will drop again to an average of $3.13 in December and to $2.88 for all of 2022 after averaging $3.39 last month, the highest since 2014. Oil prices have dropped for a number of reasons. On one side, nations have made agreements to boost oil supplies. On the other, the omicron variant of the coronavirus dented expectations for demand on worries it would cause lockdowns and canceled travel. Benchmark U.S. crude oil has fallen nearly 15% since the start of November.

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