Inflation Predictions for 2009

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Last summer will go down in the record books as the most expensive ever to fill up the family car. But these days gas is cheaper than practically anyone predicted. Will it last?

According to the Energy Information Administration, gas should average about $2.00 a gallon this year, down about 38% from last year. Natural gas will cost about 11% less this year than last, heating oil will cost 30% less… electricity will be up, but only by 4%. See the EIA’s table of energy prices

In fact, as long as oil’s not an issue this year, inflation shouldn’t be one either.

“Inflation’s not a problem. The headline CPI will depend on what happens to oil prices. If you look at the underlying consumer price index, take out food and energy prices, we’re looking for about a 1 and 3 quarters percent increase next year.”
-David Wyss, Standard & Poors 

Unfortunately, however, that doesn’t mean everything will be cheap. The USDA is looking for 4% higher food prices: twice the inflation rate.

And according to Hewitt Associates, the average employed American will pay about 9% more for their company-sponsored health plan this year. That’s about 5 times the expected inflation rate.

Even the College Board says 4-year tuition costs are expected to rise about 6% this year: 3 times the inflation rate.

Bottom line? Average inflation will be low this year, actually negative at the pump. But if you’re going to paying for college, health insurance or food, your personal inflation rate may be higher than the headlines might suggest.

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