LEXINGTON, Ky. (LEX 18) — As many large retailers begin cutting prices, it could be a significant sign of cooling inflation rates.
In recent weeks, companies like Walmart, Target and McDonald's have announced price cuts or expanded deals on products throughout the country.
Target announced last week that it would be reducing prices for 5,000 products, including groceries and essential household items.
For example, Target's generic-brand unsalted butter will see a price drop of about $0.20, and Clorox scented wipes will see a price drop of $0.80.
The change comes as the Consumer Price Index shows evidence of cooling inflation. April's CPI report shows food prices increased just 2.2% over 2023, which is very close to the Federal Reserve's target of 2%.
Michael Clark, the director of the University of Kentucky's Center for Business and Economic Research, said falling prices can be credited to easing costs for retailers as supply chain issues are resolved.
"The prices of those inputs, what they're purchasing, will tend to go down, and then competitive pressure pressures will tend to force retailers to pass those cost reductions onto their customers," Clark said.
Inflation has put pressure on retailers like Target as people find cheaper alternatives. The company revealed a 3.7% decline in sales in the first quarter of 2024.
"They might purchase less," Clark said of consumers. "They might look for substitutes, which means that instead of going to Target, they might be going to a retailer that maybe provides goods at lower prices."
Walmart is also rolling back prices on thousands of items in stores, and McDonald's is debuting a $5 meal deal at locations across the country.
Clark added that this is a natural step in the inflationary cycle and expects it to continue.
"We may see some months where prices pop back up a little bit and then maybe slow back down but the general trend that we're seeing right now is that those inflationary pressures are generally easing," he said.
