A Sign of Hope on the Horizon as Inflation Falls for the First Time in Two Years

It may not yet be apparent to everyone, but consumer prices in the US have started to fall for the first time in nearly three years. Most notably, gasoline prices started to fall in December, and the hope is that this will begin a downward trend in prices overall as 2023 gets rolling. Of course, the tight labor market may slow the trend, but the new year may be off to a great start in terms of consumer pricing.

In addition to lower unleaded gasoline prices—a huge relief for this commuter-based workforce—tags at the supermarket have also seen a downward trend, though prices are still rising. According to a report to the United States Department of Labor, while wholesale prices have increased yet again, this is the smallest monthly increment since March 2021. At the same time, housing and utility prices remain impossibly high, so the shift may not be big enough or coming fast enough for consumers to appreciate it.

Looking forward, though, the slowdown in food price increases could be a definite sign that this inflation period is ending. If this is true, it means the inflation surge is finally cooling, which could encourage the Federal Reserve to lower its interest rate in the coming months After all, this is the fastest rate increase cycle from the central US bank in at least 40 years.

Specifically, the consumer price index slipped by just 0.1% last month, the first decline since May 2020. This was just as the first wave of COVID-19 had put the country on its heels. At the same time, the dip in December offset the 0.1% CPI increase from November. Still, any decline is a good sign.

In addition, gasoline prices have tumbled, on average, about 9.4% across the United States. This is on top of the 2.0% drop in November. The hope is to continue a downward trend in petroleum gasoline, especially as natural gas and electricity are currently up 3% and 1%, respectively.