Inflation Has Cooled, But Will Prices Ever Come Back Down?

If grocery shopping still feels like a punch to the gut, you’re not alone.

Even though inflation rates have slowed dramatically since 2022, it can be hard to tell. Prices are still going up on everything from food and clothing to rent and cars, and many of us are having a hard time accepting this new reality.

But will we ever see the prices we’d gotten used to before the pandemic?

Probably not — at least in most cases. Historically, prices generally rise, albeit a lot more slowly than they have recently. So when you hear that U.S. inflation is cooling, it doesn’t mean that prices are dropping, it means they’re not going up as quickly as before. You might think of it like driving a car. You can go at a faster speed or a slower speed, but you’re still moving forward.

Now, it’s worth noting that we’re talking about the Consumer Price Index (CPI) here, which is an overall measure of our day-to-day living expenses.

The prices of some individual items have in fact dipped back down, though they are often still higher than they were before COVID-19. The average price for a gallon of milk, for instance, reached $4.22 in 2022, but has since fallen to about $4.04 (as of October.) Not as nice as the $3.20 we enjoyed back in 2020, but a tad better.

The CPI has basically been on an upward climb for decades (check out this chart,) though it’s dipped briefly a few times, usually during recessions.

The sticker shock we’re grappling with now is a symptom of an abnormally fast increase: The inflation rate — which measures how much the index rises over any 12-month period — got as high as 9.1% in 2022 after bobbing between 1% and 3% for most of the 2010s. Although it’s back to a more normal range, the index is still up over 20% since before the pandemic. Ouchy.

What Americans are experiencing now is disinflation, which is a slowdown in inflation. The Federal Reserve says some amount of inflation — right around 2% — keeps the economy strong. So even if it sounds appealing to a population reeling from dramatically higher prices, the goal is actually to avoid deflation, which is a sustained drop in prices. (If people think prices are falling, they may wait to buy things, and that can lead to higher unemployment and lower incomes).

So what? It may be frustrating, but prices aren’t going down. Since you can’t control inflation, focus on things you can control, like making a budget, managing your debt, and investing for your future.

Related Reading

Why Donald Trump’s Promise to ‘Defeat Inflation’ Is Harder Than It Sounds (Wall Street Journal video)

The Problem Isn’t Inflation. It’s Prices. (Vox)

Inflation Dictionary: Your Guide to the Jargon (The Balance)

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