FAU report shows despite easing inflation, consumer prices will remain high

On inflation, Scott plays the blame game.

Despite the national inflation rate consistently dropping over the past year, a new study conducted by Florida Atlantic University (FAU) shows prices will remain high for general goods.

While the personal consumption expenditure price index now has a rate of 2.1% as of September and over the past year, that does indicate stabilization. But price tags on goods won’t be going down, according to the FAU monthly inflation report released this month.

“The good news is that the period of high inflation appears to be in the rearview mirror. The bad news is that prices remain permanently elevated,” said William J. Luther, associate professor of economics in FAU’s College of Business. “The PCEPI is about nine percentage points higher today than it would have been had inflation averaged 2% since January 2020. This unexpected burst of inflation transferred wealth from savers and employees to borrowers and employers.”

When excluding volatile commodities such as food and energy prices, core inflation remains elevated, according to the FAU report. Core inflation increased to an annual rate of 3% in September. Housing services prices is contributing to that level of inflation which grew at a “continuously compounding annual rate of 3.8% in September.”

According to Luther, the Federal Reserve could have taken measures to work against that.

“If the Fed were committed to price stability, it would have helped bring prices back down to a level consistent with pre-pandemic inflation,” Luther said.

Officials with the Fed say there may be more interest rate cuts this year.

“As it stands, Federal Open Market Committee members intend to take some time reducing the policy rate to neutral, with policy likely to return to neutral sometime in 2026,” Luther said. “They might move more quickly if the economy shows signs of contraction or reduce the pace of rate cuts if they become concerned that inflation will pick back up.”