Is Inflation Over Yet? Nope, CPI Data Reveals Still Hotter Than Expected

When you are traveling on a road trip with kids, a question you often hear is: “Are we there yet?”

For Americans tired of the high prices they see every day from food at the grocery store to personal care products, pet food and haircuts, many are asking: “Is inflation over yet?”

The latest Consumer Price Index report shows what you probably already know – inflation is stubborn and still sticking around. Yep, kind of like that house guest who has overstayed their welcome.

In January, the CPI report showed that consumer prices rose 3.1% versus a year ago. That number came in higher-than-the-expected 2.9% reading economists had forecast. The stock market sank on the news with the Dow Jones Industrial Average down more than 500 points, or about 1.4%, its worst one-day decline since March. The hotter-than-expected inflation number triggered speculation that this could hold the Federal Reserve back from cutting interest rates soon.

So, what does this mean for you?

For now, the Fed has not vanquished inflation. Every day, Americans are seeing still-high stubbornly high food prices. It’s not your imagination. Since January 2020, supermarket prices have climbed 25%, while general consumer inflation has surged 19% over that time period. The latest CPI shows that it still costs more to fill up your shopping basket at the grocery store than it did last month.

You’ve seen it firsthand. That package of cookies or crackers is literally smaller than it was two years ago. You know the rub, you pay more, but get less. It’s called “shrinkflation.” The food companies aren’t tricking anyone with that move.

For the economy, this may mean that interest rates stay high for longer than expected, but the Fed is still expected to cut rates in 2024. For many Americans there is so much that feels out of their control. And, it’s true. We can’t control the rate of inflation, we can’t control where the stock market goes and we can’t control when the Fed will cut rates.

Fortunately, as investors, there are many things in your control. That includes how you diversify your portfolio, what assets classes you add savings to and even how you save for retirement. In the midst of the stubbornly high inflation and economic uncertainty, gold continues to shine as a proven safe-haven asset for investors.

Gold gained over 14% last year and is forecast to hit new record-high levels this year. Research consistently shows that adding up to 5% or more of your overall portfolio to gold helps improve your long-term returns by decreasing drawdowns (losses) and smoothing out the ups and downs during big stock market crashes. Throughout history, gold has served as a store of value and has kept pace or outpaced inflation over the years. Wondering what your next move should be? Explore the Top Five Gold Bullion Coins for Investors article and give Blanchard a call if you’d like personalized advice. We’re here to help.

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