Inflation Continues to Rise
As 2025 begins, inflation remains one of the most pressing financial challenges facing Americans. A recent survey revealed that 56% of respondents identified inflation as their #1 financial concern for the year. Despite efforts to bring it under control, inflation has stubbornly hovered between 2.6% and 2.8% since last May. It continues to erode the purchasing power of savings and making everyday life more expensive.1
Lingering Inflation: A Persistent Challenge
Inflation has stayed above the Federal Reserve’s 2% target since 2021. The Fed’s preferred inflation gauge hit 2.4% for the year ending in November. Even as inflation has moderated from its peak, stronger than anticipated growth is keeping price pressures alive. Fueling uncertainty about the months ahead.2
The Fed’s Balancing Act
As inflation lowered, the Federal Reserve lowered interest rates. They reduced them by a full percentage point in three moves since September. However, Fed Chair Jerome Powell said the central bank can now be more cautious when it comes to future rate cuts.
Despite these reductions, some Federal Reserve officials remain wary. Thomas Barkin is President of the Richmond Fed. He stressed the importance avoiding an inflation resurgence. “I prefer to stay restrictive longer.” He added, “I think there is more upside risk than downside risk” when it comes to lowering rates. Barkin’s inflation fear stems from rising wages and robust consumption. He added that inflation is not yet back to target and that more work remains to be done.3
Federal Reserve Governor Adriana Kugler agrees. She stated, “We are fully aware that we are not there yet—no one is popping champagne anywhere.” She highlighted the dual mission of the Fed. Price controls and maximum employment. Noting that November’s 4.2% unemployment rate may be at the optimum level. Kugler doesn’t want the Fed to cause unemployment to rise too quickly.4
Housing and Supply Chain Pressures
Housing inflation continues to be a significant concern, sitting at 4.8%—double the overall inflation rate. Limited housing supply and homeowners locked into low mortgage rates have driven prices upward. Additionally, supply shocks, once considered temporary, are now seen as a long-term feature of the economy. They had been “historically taught that you just look through supply shocks” so they didn’t do anything to address them. The Fed must now factor them in.
Political uncertainties also loom large. President Trump could bring policies such as tariff threats, tax cuts, and deregulation. All of which may stimulate growth but could also drive inflation higher.
The Fed is trying to factor Trump into the inflation question. Barkin assumes there will be an extended period of back and forth before a plan for the economy is settled on. Increasing uncertainty as a result. The Fed has already scaled back their estimates for rate cuts in 2025 and 2026 and raised their projections for inflation.
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A Labor Market Leaning Toward Growth
The labor market adds another layer of complexity. While the demand for labor has slowed, hiring remains strong. Barkin noted that the market is more likely to lean toward hiring than layoffs. This could fuel upward wage pressures. And, consequently, higher prices.
The Cost of Inflation
For everyday Americans, inflation continues to erode purchasing power. The cumulative inflation rate from 2020 to 2025 is 21.90%. Meaning prices have risen by nearly 22% over five years. This is a sobering reality for individuals trying to save for retirement or manage fixed incomes. Rising prices, coupled with interest rates that are slow to decrease, leave consumers caught in a challenging financial position.
Preparing for an Uncertain Future
Economic experts warn that high interest rates, while necessary to control inflation, could stifle growth. BNP Paribas issued a grim 2025 outlook. They see the Fed pausing its easing cycle next year amid a “substantial rise in inflation from late 2025 into 2026” due to the rollout of tariffs. The firm sees CPI settling at 2.9% by the end of next year before climbing to 3.9% by the end of 2026.6
Conclusion
In times of such uncertainty, preparing for lingering inflation is essential. Inflation slowly eats away at savings, and its effects are cumulative. As volatility and uncertainty grow, especially for those nearing or in retirement, stability becomes increasingly important.
One way to protect your assets from inflation is with precious metals like gold. Unlike fixed-return investments such as bonds or CDs, which lose value as inflation rises, gold has historically performed well during inflationary periods, acting as a reliable hedge. A Gold IRA can offer long-term protection, preserving the value of your funds and providing peace of mind in uncertain times.
Don’t let inflation erode your savings. Call American Hartford Gold today at 800-462-0071 to learn how a Gold IRA can help you secure your financial future.
