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Maybe you’ve noticed that celebratory dinner out costs a bit more than it used to – or maybe you found yourself in the market for a used car and noticed a much more significant price hike. Although it’s most likely a temporary situation, the U.S. is experiencing a period of pandemic-induced inflation brought on by shortages of goods, materials and services. The result? Consumer prices are climbing at a faster pace than most working adults have seen before.

With the rising cost of everyday goods and services putting pressure on their wallets, Americans are working to both stretch every dollar and make smarter purchasing decisions. We’ve all been looking forward to rebounding from the pandemic’s lockdowns and the associated financial difficulties. Relief from current inflation may be a way off, but there are steps you can take to fight higher prices and make your dollar go further.

Inflation Going Up – and Up

By the simplest definition, when too many dollars are chasing too few goods, you get inflation. That’s what’s happening now, as America continues to enjoy a recovering economy and more social opportunities due to fewer pandemic-related restrictions on activities. For example, according to federal data:

  • In July, the U.S. core inflation rate (which doesn’t count food or energy costs) rose 4.2% – the fastest pace since November 1991.
  • While restaurant prices have increased 0.7% from a year ago, used car prices are up 30%.
  • Rent in some areas has increased by as much as 3%.
  • The median list price of a home in July was up 10.3% from a year earlier.

The nature of the current rise in prices on everything from haircuts to groceries means it’s driven by factors that are temporary, including supply shortages and increased consumer demand. True inflation occurs when prices continue to rise year after year after year.

Federal Reserve Chair Jerome Powell has said that while inflation will likely remain elevated in the coming months, it is expected to become less severe in the midterm. He’s optimistic that job growth and consumer spending will keep fueling the economy.

What You Can Do

When it comes to normal household spending – food, gasoline, clothes – this is a time for adjusting budgets to compensate for higher prices. In terms of bigger purchases and longer-term financial planning, though, you should take a closer look at how the current inflationary period can shape your decisions.

  • Hold off. With prices driven higher at the moment, you might reconsider purchases in certain categories, like air travel and hotel stays, for instance, or buying that used car. Instead, set aside funds and save now to make those purchases later, when your money will go further.
  • Act now. That said, loan interest rates now are still at an all-time low as the economy recovers from the pandemic. So if you need a loan to finance a big purchase or are looking to refinance your house, now is the time. Though drastic measures to combat inflation – a significant rise in rates, for instance – likely won’t take place until 2023, rates are expected to be on the rise soon. Don’t wait if you plan to refinance, take out an auto loan or seek a personal loan to consolidate debt.
  • Stay smart. While you’re keeping an eye out on ways to save during temporary inflation, don’t forget to evaluate opportunities to make smart purchases, and to ensure that you have an adequate emergency fund.

Your Key Connection

Key offers a variety of financing options to meet your needs, including home mortgage refinance loans, auto loans and low-interest personal loans.

We know talking about money can be tough, so if you’re not sure where to begin, visit your local Key banker. We’re ready with simple questions, straightforward ideas and zero judgment.

When factors beyond your control cause a shake-up across the wider economy, a balanced approach to what you can control will help you manage your financial situation, keeping everything stable and headed in the right direction.

This material is presented for informational purposes only and should not be construed as individual tax or financial advice. KeyBank does not provide legal advice.

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