Your Financial Future: Inflation rate improving but prices remain high

This week, the Federal Reserve Board has a scheduled meeting to decide what to do about interest rates. At its last 10 meetings, it has raised rates. Last June, inflation was 9.1%, a 40-year high. May results were just announced and they were just over 4%. While this is a great improvement, it is still twice the Fed's targeted rate. The average family is still paying about $340 more for goods per month than last year.

Most economists are predicting that the Fed will leave rates at the current rate at this meeting to gauge what future action is still necessary. It can take time for adjustments to happen. Unexpected events like the past weekend's bridge collapse in Philadelphia can cause prices to increase. Thousands of trucks used that bridge every day, and detours and slower deliveries increase costs. The war in Ukraine also stimulates inflation because of lost production there, increased spending on military weapons and the influence on energy supplies. While some hope that the Fed will start to lower interest rates, that is probably unlikely to occur anytime soon.

Many prices remain much higher, such as eggs, which are up 21.4%; motor vehicle repairs, up 20.2%, and insurance, up 15.3%. Most prices will never return to pre-pandemic levels because of the higher cost paid for wages and rents. These costs do not normally go down. Taxes are another area likely to go up in the future because the government deficit keeps climbing.

Inflation has raised prices of most things, especially restaurant meals. Higher menu prices already increase the cash value of tips, even if the percentage stays the same. With many consumers feeling cash-strapped, Americans are starting to push back against tip creep. During the pandemic, many people gave more generous tips because they were concerned about closed businesses and lost jobs. On top of that, they were flush with cash from stimulus money. Now, according to Bankrate, two-thirds of Americans have a negative view about tipping.

People are especially concerned about the prompts often printed on the bottom of a receipt. Originally, tips were about 10%. Over time they worked up to 15%, then 20%. Now many prompts are for 22 to 25%. Tips started "to insure prompt service," which we know often does not happen in restaurants. Sometimes it is the server's fault and sometimes it can be attributed to other reasons.

Some employees are very dependent on tips while others are paid more salary and tips are only a bonus. In some of the highest-end restaurants, waitstaff earn so much, they pay the businesses for the right to work. Now we see tip jars in counter service restaurants, convenience stores, hair care businesses and delivery services. Tip fatigue is definitely creeping into society.

Gary Boatman is a Monessen-based certified financial planner and the author of "Your Financial Compass: Safe passage through the turbulent waters of taxes, income planning and market volatility."