that has been occurring since June. This decrease follows a sharp increase in prices in late March and April, due to the coronavirus pandemic’s disruption of domestic and global supply chains. Despite this drop in inflation, experts expect consumer prices to remain elevated through the rest of 2020, as the COVID-19 crisis continues to weigh on the world economy.
In response to this, the Federal Reserve has kept interest rates near-zero and is implementing a number of measures to ensure consumer prices remain stable. The Fed is pumping more money into the economy, buying Treasury debt and government-backed mortgage bonds, and lending to banks to increase their lending capacity. By doing so, this puts more money into circulation and provides firms with more capital, both of which can help to ensure prices remain in check.
Ultimately, inflation depends on a delicate balance between supply and demand. The Federal Reserve’s strategies should help to contribute to a stable level of prices, but only time will tell if this slowdown in inflation continues.
