Prices

The news is filled with stories about people who want prices to come down but they are facing an uphill battle. The Consumer Price Index (CPR), is based on the price of a fixed market basket of goods and services in the current year as compared to past years. In 1950 it was $23 and today it is $324 for an average annual increase of 3.5%. What one dollar would buy in 1950 cost $13 today. Since Trump took office, the index has been about 3%. One way to lower prices on particular items is to increase supply like what has been done with oil and natural gas but this will only be effective over a short period and in time the price will begin to rise. Another way to lower prices is to lower the interest rates which will allow home mortgages at lower rates. Since Trump took office in his second term the fed rate has declined from 4.5% to 4.0%. Inflation is holding at 2.7% and this will allow the fed to make additional reductions. When a politician runs on the promise of lowering prices he should be questioned as to how he plans to do that. When Trump campaigned saying he would lower prices that was foolish. He should have said he would slow the rise in prices by tackling inflation. Anyone who has lived over the past 75 years understands that overall prices do not come down.