When Will Prices Go Down And How Can You Save Money?

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It’s no secret that everything from groceries and gas, to airline tickets and rent is more expensive than it used to be, and many Americans are left wondering when prices will go back to “normal.”

The short answer is that it largely relies on a variety of factors influencing today’s record-high inflation — post-pandemic consumer demand, ongoing supply chain shortages, geopolitical events, the war in Ukraine — and there are various viewpoints on how most of these factors will unfold.

Here’s what the experts say about when prices may level out.

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There’s no straight answer on when prices will go down, but it’s not too far off

Pinpointing how soon prices will go down again entails estimating large-scale contributors, such as when global supply chain issues will be resolved and when the Federal Reserve’s interest rate hikes will slow the economy enough to lower inflation. For this reason, and because think tanks, research organizations and economists use varying reasoning, it’s difficult to give a clear answer.

Some, like Alan Blinder, professor of economics and public affairs at Princeton and former vice chairman of the Fed, suggest that inflation will not last for years. “One day, hopefully soon, food and energy prices will level off and the supply chain problems will dissipate,” Binder writes in a recent Wall Street Journal op-ed. When that happens, Binder says, “…inflation will fall as quickly and dramatically as it rose. We’ve seen it happen before.”

In other words, prices could drop all of a sudden. Blinder also adds that raising interest rates won’t be the end-all solution to lowering inflation.

Investment research firm Morningstar gives a more granular prediction, saying that prices will fall precipitously by next year.

Morningstar looks to the Personal Consumption Expenditures Price Index, also known as the PCE Price Index, which is the Fed’s preferred measure of inflation. You may have otherwise heard of the Consumer Price Index (CPI) to gauge inflation, but PCE captures a wider scope and better reflects the change in consumers’ spending habits when accounting for rising prices.

The Fed uses the PCE Price Index when it refers to its target inflation rate of 2%, Preston Caldwell, head of US economics for Morningstar, tells Select. For context, latest PCE Price Index data shows that the year-over-year inflation rate is at 6.3% as of April 2022.

But in Morningstar’s second quarter “US Economic Outlook,” researchers predict that 2022 will have the highest rate of inflation, as measured by the PCE Price Index, at 5.2%, before dropping. Caldwell estimates that the inflation rate will average around 1.5% between 2023 and 2025.

“While consensus has largely given up on the ‘transitory’ story for inflation, we still think most of the sources of today’s high inflation will abate, and even unwind in impact, over the next few years,” Caldwell says. “This includes energy, autos and other durables. Worries about inflation broadening out into the rest of the economy, including via high-wage growth, look overblown.”

So consumers can expect that this year will be the worst for inflation, with prices estimated to go down by 2023, according to the latest Morningstar research.

How to save money and maximize your spending when prices are high

While the effects of inflation are mostly unavoidable, there are some areas where you can cut back to lessons its impact on your wallet. For example, meats, poultry, fish and eggs are among the foods with the highest price increases, so you may consider implementing a meat-free meal one or more days a week, or substitute some meat in a dish for less pricey ingredients such as vegetables.

There’s only so much you can avoid when grocery shopping, however. That’s when a rewards credit card can come in handy. This way, you’re at least earning something in return for spending so much.

The Blue Cash Preferred® Card from American Express is a top choice for offering supermarket rewards. Cardholders earn 6% cash back at US supermarkets on up to $6,000 per year in purchases (then 1%). You’ll also score at the pump with 3% cash back at US gas stations. Cash back is received in the form of Reward Dollars that can be redeemed as a statement credit, which lowers your credit card bill. The card is also offering a welcome bonus of a $300 statement credit after you spend $3,000 in purchases within the first six months of card membership — a notably longer time frame than most welcome offers.

Blue Cash Preferred® Card from American Express

On the American Express secure site

  • Rewards

    6% cash back at US supermarkets on up to $6,000 per year in purchases (then 1%), 6% cash back on select US streaming subscriptions, 3% cash back at US gas stations, 3% cash back on transit including taxis/rideshare , parking, tolls, trains, buses and more and 1% cash back on other purchases. Cash Back is received in the form of Reward Dollars that can be redeemed as a statement credit.

  • Welcome bonus

    Earn a $300 statement credit after you spend $3,000 in purchases on your new Card within the first 6 months.

  • annual fee

    $0 introductory annual fee for the first year, then $95

  • Intro APR

    0% for 12 months on purchases from the date of account opening; N/A for balance transfers

  • Regular APR

  • Balance transfer fee

  • Foreign transaction fee

  • Credit needed

To minimize your gas spending, look to apps such as GasBuddy that can help you hunt down the cheapest gas prices near you. GasBuddy also has a rewards card that connects to your bank account and offers up to 25 cents off a gallon — it’s not a credit card and won’t affect your credit score.

You can also use a gas rewards credit card like the PenFed Platinum Rewards Visa Signature® Card, which offers the highest rewards rate on gas. Cardholders earn 5X points on gas purchases at the pump and electrical vehicle charging stations. In addition to earning at gas stations, cardholders also benefit from unlimited 3X points for supermarket purchases. Keep in mind that PenFed is a credit union, so membership is required to open this credit card. Anyone can join by completing a few extra steps: apply, open a savings account with a $5 deposit and maintain a $5 account balance.

PenFed Platinum Rewards Visa Signature® Card

  • Rewards

    5X points on gas purchases at the pump and electrical vehicle charging stations, 3X points on supermarket purchases, 1X point on all other purchases

  • Welcome bonus

    15,000 points when you spend $1,500 in the first 3 months from account opening

  • annual fee

  • Promo APR

    0% promotional balance transfer rate for 12 months on transfers made from now until September 30, 2022.*

  • Regular APR

    14.49% to 17.99% variable on purchases; 17.99% non-variable on balance transfers

  • Balance transfer fee

  • Foreign transaction fee

  • Credit needed

*After the promotional balance transfer period, the APR for the unpaid balance and any new balance transfers will be 17.99%. A 3% balance transfer fee applies to each transfer. This transaction is subject to credit approval. If you take advantage of this balance transfer, you will immediately be charged interest on all purchases made with your credit card unless you pay the entire account balance, including balance transfers, in full each month by the payment due date.

For rates and fees of the Blue Cash Preferred® Card from American Express, click here

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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