Perspectives on Inflation 2022

January 19, 2022 by Chevron Federal Credit Union

Delta and Omicron. High inflation. Supply chain snags. Record housing prices. Severe weather. Meme traders. As far as impacts to the economy go, 2021 was another topsy-turvy year. What could possibly be in store for 2022?

Picking up where we left off in our two-part series last fall about inflation and the Federal Reserve’s role, we want to share some of the latest perspectives on the economy ahead. And while current events make precise predictions a moving target, there are a few questions and answers to keep in mind as all of us cope with ongoing inflationary trends.

Will prices for the things I buy continue their upward spiral?

Inflation is pretty easy to spot. Every time we gas up the car or do the weekly grocery shopping, upticks in pricing are plain to see. The proof came on Jan. 12, when the latest Consumer Price Index (CPI) — a main inflation gauge that measures costs across dozens of items — spiked 7% in December from a year ago. That’s the highest rate since 1982.

This pressure has been affecting households’ purchasing power for months. And a recent national poll finds that the economy and inflation are now displacing even COVID as Americans’ top concerns. Indeed, the fresh CPI data showed that while the runup in gas prices stabilized in December, food, clothing and cars are growing steadily more expensive.

None of this has gone unnoticed by the Federal Reserve, which is set to manage inflation more aggressively this year. Federal Reserve Chair Jerome Powell pledged to do what’s necessary to rein in an inflation surge, telling the Senate Banking Committee on Jan. 11, “if we have to raise interest rates more over time, we will.” Fed officials have signaled that they will raise rates three times in 2022, while Wall Street firms like Goldman Sachs are forecasting as many as four increases — happening in March, June, September and December.

The takeaway? Barring new shocks to the system, economists generally anticipate inflation levels could taper by about midyear.

How could Fed action affect my personal finances?

While the Fed’s exact timing is still vague, it’s helpful to review how its policy actions may shift the balance of economic factors that can shape our everyday finances.

The Fed tinkers with the benchmark fed rate to achieve a healthy economy by studying inflation and employment data. Rate changes impact banks and credit unions, which factor in the fed rate when setting interest rates for customers.

For example, increases to the fed rate translate to higher borrowing costs, but also higher rates of return. So, while higher rates will affect credit card balances and adjustable-rate loans, a rate hike also means higher interest paid on savings deposits and other accounts that pay dividends.

What can I do to keep up with inflation?

Most economists agree that we’re in an environment where inflation is likely to accelerate a bit more before easing, at least during the early part of this year. Here are two things to keep in mind that can help counter its effects — no matter the cause.

Keep an eye on the CPI. It’s a good indicator of the total cost-of-living increase that you should expect in the coming year.

Aim to invest with success. Saving and investing can help counteract the negative effects of inflation — if you can net a rate of return that’s ideally greater than the rate of inflation over the long run.

Focusing on what’s meaningful to your money

Pandemic-driven mismatches between demand and supply are still driving a significant portion of inflation. And COVID-19 and its variants will no doubt continue to play a role in the overall economy and the Fed’s decision-making going forward. While we can’t individually influence these changes, we can make wise decisions with our money regardless of economic conditions. Choosing credit union membership, for example, is a smart choice for so many reasons; it’s a worthwhile reminder to learn why your credit union can support all of your financial goals.


From everyday finance to life’s big money moments, it’s better when you belong.