Last week we noted that inflation has already entered the economy. It isn’t showing up in nominal price hikes because it never does at first… As we noted last week…
Let’s be clear here… inflation does NOT mean prices have to move higher in nominal terms. The reason for this is because companies cannot and will not simply raise prices overnight. Consumers will not simply put up with the cost of a good going up time and again.
So don’t look for the cost of an item to necessarily go straight up in nominal terms. This can happen, but more often than not, corporations engage in a number of different strategies to maintain profit margins without raising prices.
These strategies include:
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