Is inflation finally easing? Financial professional weighs in

Inflation is at its highest rate in 40 years. However, experts indicate that the pressures of inflation are beginning to ease.

Inflation is at its highest rate in 40 years. However, experts indicate that the pressures of inflation are beginning to ease.

Local financial professional Matt Stevenson from Allied Wealth appeared on KPRC 2+ to discuss the ongoing inflation issues and to share some money-saving strategies. Fr his insights, scroll below or watch the video at the top of the page.

Q: WHAT DID THE LATEST INFLATION REPORT REVEAL?

  • The Labor Department released its latest report saying the consumer price index fell 8.5% from a year earlier, which was lower than expected.
  • Energy prices have decreased 4.6% in the last month. However, the food index increased by 1.1%, and rental costs increased by 0.5%.
  • Wall Street reacted positively to the new numbers. Following the latest CPI report, the S&P 500, Nasdaq and the Dow rose more than 2%.

Q: DOES THIS MEAN THE FED WILL MAKE ANOTHER LARGE INTEREST RATE HIKE?

  • The Fed has raised interest rates four times over 2022 to a total of 2.25 percentage points, and they are expected to continue raising the benchmark in order to reach its 2% target rate.
  • Even though interest rate hikes make borrowing more expensive for consumers, the goal is to slow down spending and cool inflation rates.
  • The latest numbers from the CPI show that the increases the Federal Reserve has made to interest rates are having a positive impact on combating inflation.
  • The conflict between Russia and Ukraine and ongoing COVID-19 outbreaks have continued to cause supply chain issues that simply can’t keep up with demand, which drives prices even higher.

Q: HOW CAN WE STAY WITHIN BUDGET AS PRICES CONTINUE TO RISE?

Review Your Budget

  • You’re paying more for almost everything now, which means last year’s spending plan is probably not going to work for you and your family at the moment.
  • If inflation is causing you to spend more than you earn, review your budget and update it accordingly.
  • Think about where you can cut costs. Do you really need all those streaming service subscriptions? Can you wait to take a vacation until next year? Can you carpool with a coworker?
  • If you don’t have a budget yet, now is the time! I have a budgeting worksheet on my website, alliedwealth.com, to help you get started.

Comparison Shop

  • Especially when shrinkflation is happening, it’s important to pay attention to prices and quantities when you’re shopping.
  • If one company reduces its product size but not its price, there might be another brand that hasn’t.
  • You can also comparison-shop stores by looking them up online or using an app like GasBuddy to find gas stations offering lower prices and fill up there.
  • You can do the same thing with some bills. If your internet provider is charging more than their competition, call and negotiate a price reduction.

Capitalize on Rewards

  • Many stores offer rewards for loyalty members, so it might be worth it to sign up and save.
  • When you sign up, they’ll likely send you updates on sales and coupons to help your dollars stretch a little further.
  • Although there’s usually an upfront cost to join, bulk stores like Costco and Sam’s Club offer plenty of deals on household essentials and even price cuts on gas.
  • If you do a lot of shopping online, apps like Honey and Rakuten offer cash back to save money.
  • If you’re responsible enough to pay off your balance at the end of each month, sometimes using a credit card to earn travel points, cash back or other rewards can be a good way to make the most out of your spending.

Stay Invested

  • Essentially, an 8.5% inflation rate means your dollar has lost 8.5% in value, which is a loss you’ll never be able to recover from savings returns.
  • Wall Street may look uncertain, but stocks remain the most likely way to beat inflation in the long run because of the potential for long-term gains.
  • A good financial strategy does not let short-term volatility impact a long-term approach.
  • Working with a financial professional can help prevent you from making a knee-jerk reaction and keep you on track.
  • At Allied Wealth, we focus on minimizing market risk for our clients through outcome-focused planning, giving them peace of mind to spend money in retirement.

Q: WHEN WILL INFLATION START TO REVERSE?

  • It’s hard to predict how long inflation will continue to rise, but the Fed’s efforts should start to produce results as people borrow less and the demand for goods and services decreases.
  • Some economists estimate inflation will subside by the end of 2023, but it’s hard to pinpoint an exact answer.
  • It’s important to keep in mind that the economy is cyclical; a good strategy is to use the good times to prepare for the bad times.
  • Historically, we know economic downturns and recessions won’t last forever, which means there will be a light at the end of the tunnel.

You can stream KPRC 2+ weekdays at 7 a.m. on click2houston.com and on the KPRC 2 app.