Inflation: Why Prices Never Go Back Down
Coffee is up more than 40% since the 2025 tariffs. Electricity keeps climbing on AI data-centre demand. Eggs and petrol both fell. Why do some prices reverse and most never do?
This video explains how inflation is actually measured - the basket, the price level, and why a falling inflation RATE is not the same thing as falling prices - and why central banks target a small, steady 2% rise rather than zero, a template set by New Zealand's Reserve Bank Act of 1989. It covers the two-part ratchet that keeps prices from reversing: downward-sticky wages and multi-year contracts, and the self-fulfilling power of inflation expectations.
It then covers the one case where prices genuinely do fall for years - Japan's 1995-2013 deflation - and why that is a warning sign of a broken economy, not a healthy one, because of the debt-deflation spiral and the zero lower bound that strips a central bank of its main tool.
The second half is the live 2025-2026 case: new US tariffs of 50% on Brazil, 20% on Vietnam and 19% on Indonesia pushed ground coffee up more than 40% in a year; Fed Chair Jerome Powell called the effect a 'one-time shift in the price level', while the Fed's own forecasts crept upward anyway. A separate flat 10% Section 122 surcharge was ruled invalid by a US trade court in May 2026 and later expired on its own statutory clock - legally distinct from the coffee tariffs, which remain in force. Data-centre demand pushed PJM's wholesale power price up 75.5% in Q1 2026, a second driver behind rising household electricity bills that has nothing to do with tariffs at all.
It closes on the two prices that did fall - eggs, as flocks recovered from avian flu, and petrol, on a global supply glut - and on what it would actually take for a genuine, broad fall in prices: a demand collapse or a supply glut across the whole economy, both rare, and both painful when they happen.
Every figure is on screen with its source and date.
In these topics
Tags
Chapters
- The Prices That Never Came Back
- What Inflation Actually Measures
- Why 2%, Not Zero
- The Ratchet: Wages and Contracts
- The Ratchet: Expectations
- When Deflation Does Happen, It's a Warning
- The Zero Lower Bound Trap
- The 2025-2026 Tariff Shock
- 'One-Time' Versus Persistent
- The AI Power Bill
- The Exceptions: What Did Fall
- What Would Actually Have to Break
Sources and credits
Photo credits (Wikimedia Commons)
- Jerome Powell, Federal Reserve Chair, answering reporters' questions at an FOMC press conference: Federalreserve, Public domain - https://commons.wikimedia.org/wiki/File%3AChairman_Jerome_Powell_answers_reporters%27_questions_at_the_FOMC_press_conference_%2855239092858%29.jpg
- Marriner S. Eccles Federal Reserve Board Building, Washington DC (1937): Federalreserve, Public domain - https://commons.wikimedia.org/wiki/File%3AUS_Federal_Reserve_Eccles_Building_1937.jpg
- Bank of Japan head office building, Tokyo: Syced, CC0 - https://commons.wikimedia.org/wiki/File%3ABank_of_Japan_building_%2840368%29.jpg
- Tokyo street scene, December 1988: Unknown authorUnknown author, CC0 - https://commons.wikimedia.org/wiki/File%3AStreet_view_of_Tokyo_in_December_1988.jpg
- Reserve Bank of New Zealand building, Wellington: Clilly4, CC0 - https://commons.wikimedia.org/wiki/File%3AReserve_Bank_of_New_Zealand_building%2C_Wellington.jpg
- New Zealand Parliament Buildings (the Beehive), Wellington: User: (WT-shared) ED01 at wts wikivoyage, Public domain - https://commons.wikimedia.org/wiki/File%3ABeehive_%28New_Zealand_Parliament_Building%2C_Wellington_New_Zealand%29.jpg
- US supermarket produce aisle with shelf prices, Clearwater, Florida, 2020: MatthewHoobin, CC0 - https://commons.wikimedia.org/wiki/File%3AParsley_for_99_cents%2C_and_other_vegetables%2C_in_supermarket_in_Clearwater%2C_Florida%2C_US_on_25_September_2020.jpg
- Large-scale US data centre exterior (NSA Utah Data Center, used as a generic hyperscale data-centre building): User:ParkerHiggins (Electronic Frontier Foundation), CC0 - https://commons.wikimedia.org/wiki/File%3AEFF_photograph_of_NSA%27s_Utah_Data_Center.jpg
Primary sources
- Bureau of Labor Statistics, Average Price Data, series APU0000717311 (ground roast coffee, per lb), via FRED, data through August 2026, fetched 3 October 2026 - the $6.47/$9.14/$9.72/$9.30 price points and the partial 2026 easing.
- Bureau of Labor Statistics, CPI 'Coffee' category, 12-month percent change, July 2026 release, via usinflationcalculator.com and BLS reporting, checked 3 October 2026 - the +10.3% y/y figure.
- USTR tariff schedule and trade-press reporting (Barchart, AOL), checked 3 October 2026 - the 50%/20%/19% tariff rates on Brazil/Vietnam/Indonesia coffee imports.
- Ward and Smith LLP, Green Worldwide Logistics, NFFS, and FlavorCloud trade-compliance analyses of the Court of International Trade's Section 122 ruling and the Federal Circuit's stay, checked 3 October 2026 - the 7 May 2026 ruling, the plaintiffs-only relief, the appeal, and the surcharge's 24 July 2026 expiration under its own 150-day statutory cap.
- Federal Reserve, FOMC press conference transcript, 13 October 2025 (reported contemporaneously by Fox Business and MNI; quote matches the Fed's own transcript), checked 3 October 2026 - Powell's 'one-time shift in the price level' quote, used verbatim on screen.
- Federal Reserve, Summary of Economic Projections, 17 September 2025, Table 1, federalreserve.gov/monetarypolicy/fomcprojtabl20250917.htm, fetched in full 3 October 2026 - the median core PCE projections of 3.1% (2025), 2.6% (2026) and 2.1% (2027).
- USDA Economic Research Service, Food Price Outlook, releases through early 2026 (via Grocery Dive, Food Dive, Oklahoma Farm Report reporting), checked 3 October 2026 - the 2.5% food-at-home 2026 forecast and the 27.4% forecast egg-price fall.
- Monitoring Analytics (PJM's Independent Market Monitor), Q1 2026 state-of-the-market report (via Bloomberg Law and SEJ reporting), checked 3 October 2026 - the 75.5% y/y wholesale power cost rise to $136.53/MWh.
- US Energy Information Administration, Short-Term Energy Outlook (December 2025) and retail price data through April 2026, checked 3 October 2026 - the 4.2% 2026 forecast rise and the 7.3% year-on-year rise to April 2026.
- US EIA retail gasoline data and GasBuddy's 2026 forecast (via Rigzone and Hydrocarbon Engineering reporting), checked 3 October 2026 - the $3.10/gallon 2025 average and the sub-$3 2026 forecast.
- Reserve Bank of New Zealand Act 1989 (royal assent 20 December 1989) and RBNZ institutional history - the first legally binding inflation target.
- Bank of Japan policy statements and speeches, 2013-2014, and standard accounts of Japan's 1995-2013 deflation period under Governor Haruhiko Kuroda's 2013 target.
Not regulated financial advice.