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Inflation grew in December at the fastest annual pace in nearly 40 years, according to Bureau of Labor Statistics (BLS),

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The Labor Department’s Consumer Price Index (CPI), which measures expenses such as food, shelter and new vehicles, found that prices rose 0.5% last month and 7% over the previous year. This is the fastest pace of price increase since 1982.

The increase in inflation was driven by significantly higher prices on many essential consumer spending. Energy costs have risen 29.3% since December 2021, while the cost of used cars and trucks has risen 37.3%. The cost of food rose 6.3% over the past year, although these prices are now rising at a slower monthly rate. and the cost of shelter including rent and mortgage payments, an increase of 4.1% year-on-year.

Separately, hourly wages are hardly keeping pace with rising inflation, BLS data is shown. Average hourly earnings rose 0.6% in December, but were offset by a 0.5% increase in consumer prices, leading to a 0.1% increase in real earnings.

CPI data is closely monitored by the Federal Reserve, which is expected to Apply multiple interest rate hikes To combat persistent inflation in 2022. Keep reading to learn more about what causes inflation, as well as what you can do to handle rising prices. If you are interested in taking advantage of today’s interest rates, you can Visit Trusted to Compare Rates Free on many financial products without affecting your credit score.

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Why is inflation so high?

US current rate of inflation The pandemic stems from a strong economic recovery after an unexpected economic slowdown. In the early stages of the pandemic, businesses closed operations and unemployment skyrocketed. But the US economy quickly gained strength amid the Fed’s emergency measures, stimulus spending by the federal government and vaccine delivery.

Consumer demand for goods and services suddenly soared as Americans were given stimulus cash, but businesses struggled to keep up with demand after being hit by economic disruption. This results in supply chain issues, labor shortages and increased wages, and Businesses had to raise prices To compensate for the high operating cost.

Increased government spending also plays a role in inflation. Federal Reserve Bank of San Francisco It recently wrote that President Joe Biden’s $1.9 trillion US rescue plan (ARP) further contributed to inflation by providing “financial support during a strong economic rebound.”

And inflation isn’t just a problem for American consumers. pew research center found that consumer prices are rising around the world, although the United States had the eighth highest inflation rate in the third quarter of 2021 among all the countries examined in the study. The fact that inflation is occurring globally shows that the COVID-19 pandemic has had a broader economic impact, and consumers are bearing the brunt of rising prices.

Inflation not temporary, says MBA economist: Here’s what it means for interest rates

3 ways consumers counter rising prices

Economists predict that inflation is here to stay. While Federal Reserve Chairman Jerome Powell said before Inflation was temporary, with the head of the central bank saying in November that “probably a good time to retire that term” amid steadily rising prices Reuters,

As inflation continues to rise, here are some ways to offset higher costs:

  1. Refinance loans before interest rates rise
  2. Consider buying a home instead of renting
  3. Make your home more energy efficient

Read more about each strategy in the sections below.

As inflation rises at a record pace, what could be the impact of Biden’s better plan?

1. Refinance loans before interest rates rise

The Fed’s pandemic-era economic policies slashed interest rates on many financial products to record levels in 2021. But amid persistent inflation, the Fed is Revise your economic policy Inclusion of several benchmark rate hikes in 2022.

when the feds starts Implementing these rate hikesInterest rates on other consumer lending products, including mortgages, will also increase. Of note, 30-year mortgage rates fell phenomenally in January 2021, but they have risen steadily over the year.

Still, mortgage rates are projected to rise further in the next year. Mortgage Bankers Association (MBA) predicts that the 30-year mortgage rate will reach 4.0% in 2022, with 3.1% in 2021. That means it’s time for homeowners to refinance their mortgage loan at a historically low rate.

Mortgage refinancing can also be beneficial for consumers who are looking for ways to save money amid inflation. Can refinance at a lower interest rate reduce your monthly mortgage paymentWhich can free up space in your household budget.

If you’re considering refinancing your mortgage, it’s important to take action before the Fed raises interest rates. You can start the mortgage refinance process on Credible and Compare offers across multiple mortgage lenders Immediately.

Average home insurance rates rising faster than inflation

2. Consider Buying a Home Instead of Renting

The CPI shows that housing costs have increased by 4.3% over the past year, but this could have a more significant impact on renters over time. This is because homeowners are able to lock in their monthly mortgage payments over a longer period of time, while the rent can multiply over the course of several years.

Average rental prices in the United States increased from $1,659 to $1,858 between October 2020 and 2021 Zillow Observed Rental Index (Zori). That’s a 12% increase in just one year—and some landlords may enforce the rent increase each time a tenant renews their lease.

Although Home prices close to all-time highBuying a home can help consumers plan for more consistent housing payments over the long term. If you are considering buying a home, a . use mortgage payment calculator To see if it’s worthwhile. You can do this Start Shopping for a Mortgage By comparing rates for free on Credible.

Fannie Mae: Rising home prices could drive up inflation for the coming year

3. Make Your Home More Energy Efficient

According to CPI data, the cost of energy has increased by 29.3% in the last one year. This includes a 41% cost increase on fuel oil and a 24.1% increase on utility gas services, which are used to heat homes and power kitchens. Here are some ways to make your home more energy-efficient so you can reduce your energy costs:

  • Add Insulation to Your Attic and Crawlspace
  • install rooftop solar panels
  • Switch to Energy Efficient Appliances
  • replace gas kitchen appliances
  • Upgrade Your HVAC System

Although these home improvements can pay off in the form of long-term energy savings, they can come at a high upfront cost. there are a few ways finance home renovation, including cash-out mortgage refinancing. You can do this Learn more about mortgage refinancing On reliable and determine if these home upgrades are worth the cost.

3 ways inflation is affecting your wallet, and how to counter rising prices

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