When I was up in North Carolina, I usually bought my own 2-liter bottles of soda, so I knew very well how much they cost. In Florida, I have relied on my wife to do the grocery shopping; however, I bought soda for myself yesterday, and discovered that the price had increased a whopping 50 cents since the beginning of February. Why?
Have gas prices soared during the last two months? Has the cost of the materials needed to create and bottle soda gone up dramatically in that time? Have manufacturing wages skyrocketed in 2023?
No, to all of those questions. The price has gone up because the manufacturer has determined that the market will bear a higher price. In other words, the increased profit per unit more than offsets any loss in the number of units sold.
This is the problem with which the Fed is currently struggling. Interest rate hikes won’t solve it unless they cause the markets to tank and make people like me think we can’t afford overpriced soda anymore.