Rising auto and property insurance rates are one of the biggest components of today’s inflation rate. Regardless of how you may feel about the insurance companies, this is not greedflation; it is based on objective factors, including the increasing complexity of cars and the effects of climate change. What conclusions should we draw from this?
Higher insurance costs are more akin to a tax increase than a driver of next-level inflation, because they reduce demand for other goods and services. In addition, they have no logical relationship with interest rates. As with, say, food price increases caused by bad weather, there is no reason for the Fed to base any portion of its decisions on interest rates on them.