What to Expect From Inflation in 2024

This Week, I am sharing my understanding of this article I read on WSJ  

https://www.wsj.com/podcasts/your-money-matters/what-to-expect-from-inflation-in-2024/9b9ed9e8-d56f-4fdc-86ae-1aaac0ca96ef?page=1

This Article talks about Inflation and Disinflation. Why do consumers still feel like the prices of goods purchased are high despite price drops? Inflation refers to the general increase in the price level of goods and services in an economy over time. The same amount of cash may now purchase fewer products and services than it did before inflation. In simpler terms, inflation reduces the value of money that could be spent which is where the supplier power seems effective.

It was clear how one of the Demand Shifters (Expectations) came into play in the increase of gas prices. It was said that the price of Gas went significantly high because there was fear that there would be a disruption in supplies because of Russia's war in Ukraine in 2022, causing consumers to demand more and suppliers to increase the price of Gas. However, because of the impact of the “Price Ceiling,” the prices started to regulate and ease off as there have been policy measures put in place to kind of insulate energy markets from the impact of that war.

This article interestingly, touched on several Demand and Supply Shifters. For example, during the lockdown a lot of supply chain disruptions emerged, meaning that there were shortages for all sorts of things that businesses needed to produce goods and services for, and when the pandemic began to recede, there was a rush and pressure, people were eager to do all the things that we couldn't do, hence demand was high and there was a Shortage of Supply causing a “Market Failure”.

Furthermore, we saw how Income levels, as a factor, helped improve Inflation. Since the Consumers are beginning to have enough money to afford the cost of goods, it means there was a possible chance of the suppliers and the consumers meeting at a point called Equilibrium. In one of the comments made, she said “We saw wage gains start to outpace inflation around mid-year, mid-2023, and that should continue into 2024 because inflation continues to ease. We are still seeing strong wage gains. They're not as strong as they were earlier in '23, but still, they are better than they were pre-pandemic. And so if we continue to have pretty solid wage gains and we continue to have inflation easing as it has been this year, then we should see wages better keeping up with inflation compared to 2022 and earlier in 2023”.

Taxes however can impact a consumer’s ability to afford a good, but the type of tax impacts the change in demand. Therefore, if the government still increases the tax rates, there will be a decrease in the demand for normal goods and an increase in the demand for inferior goods which will continuously cause a mismatch in demand and supply.

In Conclusion, ethical practices and effective leadership within different industries and firms can be seen as contributing to the overall health of the economy, which may, in turn, influence inflation trends over the long term.