Why are prices still rising if inflation is cooling?
Inflation has dropped from the highs it reached last year, but with continued price hikes, consumers have yet to feel the decrease in the inflation rate.
The latest September numbers released by the Bureau of Labor Statistics show that the US inflation rate stands at 3.7%. Although this is still almost double the Federal Reserve’s target of 2%, it is way below the 40-year highs it reached in June last year.
The consumer price index showed a 9.1% increase in the 12 months ending in June 2022, the high level fueled by a spike in the price of gasoline, which increased almost 60% over the year.
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Why are prices still rising in the US if inflation is cooling?
Inflation rates have clearly gone down from last year’s numbers, but prices are still going up. That’s because the lower rate only means that the pace of price hikes has slowed down, not that the prices have actually decreased. Price tags are still going higher, just not at the rate they were in 2022.
Aside from recent CPI numbers, other key inflation measures, such as the Personal Consumption Expenditures price index and the Producer Price Index, have also exhibited a slower pace.
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However, the rate of moderation has not been consistent, because factors such as sudden spikes in the price of gas and the elevated cost of housing have put the brakes on the inflation rate’s descent.
Moody’s Analytics chief economist Mark Zandi says consumers will likely see some relief soon, as business are increasing prices less quickly than they were a year ago, per CNN.
“Their costs are rising, and they are passing some of that through, but I suspect it’s going to come in a lot more here going forward; because their costs are going to rise less quickly,” according to Zandi.