In a recent post, I complained that the media tends to report just the year-over-year inflation figures even though those numbers can remain high even when inflation has stopped or prices have even fallen. I said that the month-over-month figure is a better indicator of current inflation and should be reported as well.
Well today, they reported just that, confirming my suspicion that inflation likely peaked back in June and since then has ceased or even declined.
Prices dropped in the US in December for the first time since May 2020, in an encouraging sign that the inflation crisis may be easing.
According to the latest consumer price index (CPI) – which measures a broad range of goods and services – the cost of living dropped 0.1% in December compared with a rise of 0.1% in November. The annual rate of inflation fell to 6.5% from 7.1% in the previous month, the sixth straight month of yearly declines, according to the Bureau of Labor Statistics.
Falling gas prices were by far the largest contributor to the monthly decrease, falling 9.4% over the month, more than offsetting increases in shelter indexes, which rose 0.8% over the month and were 7.5% higher than a year ago.
US inflation peaked at 9.1% in June, its highest rate since 1982, as the war in Ukraine drove up energy costs and supply-chain issues in the wake of the coronavirus pandemic continued to push prices higher.
Despite the fall, the inflation rate remains more than three times as high as the Fed’s annual target rate of 2%, and is expected to remain elevated through 2023.
The professionals at the Federal Reserve know all this of course and likely take both CPI rates and other factors into account but the general public may not be as aware and giving only the year-over-year figure may make them fearful that inflation is still high when it might have stopped or even declined.