You’re being hoodwinked because you don’t understand what inflation is. Along with millions of other people I am sure.
Prices will fall and inflation will drop to 3%
Those cannot both be factual statements. Because if there’s inflation that means prices are rising. It’s simple.
I'm not being hoodwinked and I understand inflation.
There is actually 3 types. Demand-pull inflation, Cost-push inflation and Built-in inflation. Your talking about Built-In inflation. What we are experiencing now is mostly Demand-pull inflation. Demand-pull inflation refers to situations where there are not enough products or services being produced to keep up with demand, or supply chain bottlenecks, causing their prices to increase.
That being said, when supply catches up with demand, or when demand for supply goes down, prices will go down. When the war in Ukraine ends, when fuel prices go back down, when the Ukrainian grain market returns, when businesses go back to operating at full capacity, supply will return to normal and the current elevated prices, due to these issues, will fall and return to normal. Maybe not pre-pandemic, but should fall to where Built-in inflation would have them.
Remember when the baby formula prices shot up? Inflation at its rudimentary level. Demand was greater than supply because of a factory closure. The prices are back down now, or almost back down, because the factory is up and running. The prices will be back to normal once the factory catches up.
If you make a widget that everybody wants, and have a limited supply of them, you will charge more for them. When your supply catches up with demand, you will lower your price for that widget.
This is what we are experiencing now with inflation. Demand-pull inflation. When things go back to normal, prices will drop.
Taken from Investopedia.
Why Is Inflation So High Right Now?
In 2022, inflation rates in the U.S. and around the world rose to their highest levels since the early 1980s. While there is no single reason for this rapid rise in global prices, a series of events worked together to boost inflation to such high levels.
The COVID-19 pandemic in early 2020 led to lockdowns and other restrictive measures that greatly disrupted global supply chains, from factory closures to bottlenecks at maritime ports. At the same time, governments issued stimulus checks and increased unemployment benefits to help blunt the financial impact of these measures on individuals and small businesses. When COVID vaccines became widespread and the economy rapidly bounced back, demand (fueled in part by stimulus money and low interest rates) quickly outpaced supply, which still struggled to get back to pre-COVID levels.
Russia's unprovoked invasion of Ukraine in early 2022 led to a series of economic sanctions and trade restrictions on Russia, limiting the world's supply of oil and gas since Russia is a large producer of fossil fuels. At the same time, food prices rose as Ukraine's large grain harvests could not be exported. As fuel and food prices rose, it led to similar increases down the value chains.