Inflation Is Cooling, Leaving America Asking: What Comes Next?

After six months of declines, inflation seems to be turning a corner. But the road back to normal is an uncertain one.

By Jeanna Smialek
Jan. 23, 2023, 5:00 a.m. ET

Martin Bate, a 31-year-old transportation planner in Fort Worth, spent the middle of 2022 feeling that he was “treading water” as high gas prices, climbing food costs and the prospect of a big rent increase chipped away at his finances.

“I was really starting to feel financially squeezed in a way that I hadn’t felt ever before, since finishing college,” Mr. Bate said. Since then, he has received a promotion and a raise that amounted to 12 percent. Gas prices have fallen, and local housing costs have moderated enough that next month he is moving into a nicer apartment that costs less per square foot than his current place. ... “My personal situation has improved a good amount,” Mr. Bate said, explaining that he’s feeling cautious but hopeful about the economy. “It’s looking like it might shape out all right.”

People across the country are finally experiencing some relief from what had been a relentless rise in living costs. After repeated false dawns in 2021 and early 2022 — when price increases slowed only to accelerate again — signs that inflation is genuinely turning a corner have begun to accumulate.

Inflation has slowed on an annual basis for six straight months, dipping to 6.5 percent after peaking at about 9 percent last summer, partly as gas has become cheaper. But the deceleration is true even after volatile food and fuel are stripped out: So-called core consumer prices have climbed 0.3 percent or less for each of the past three months. That’s faster than the 0.2 percent month-to-month changes that were typical before the pandemic but much slower than the 0.9 percent peak in April 2021.



Year-over-year percentage change in the Consumer Price IndexSource: Bureau of Labor StatisticsBy Karl Russell

America may have reached an inflection point on inflation at last. The question now centers on what will happen next.

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