CHARLOTTE, N.C. — Last summer, inflation hit a 40-year high, contributing to soaring prices and leaving consumers feeling sticker shock for months.
Now, those pressures are somewhat easing, according to new data by the Department of Commerce.
A key inflation index monitored closely by the Federal Reserve shows inflation dropped last month to its lowest level since April of 2021, with lower gas prices and slower-rising food costs driving the change.
But Joseph Von Nessen, a research economist at the University of South Carolina, said don't expect the cost of some items to come down with it.
“Gas prices are lower today than they were one year ago, which is good news, as we move into the travel season during the summer," Von Nessen said. "But, in general, if you look at the grocery store, if you look at items on Amazon, if you're going to a department store, most of the time when prices go up, they tend not to go back to previous levels.”
According to finance company NerdWallet, food prices rose 6.7% from May 2022 to May 2023
The Federal Reserve has been taking steps to slow the rate of increases by raising interest rates to slow spending.
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Now that inflation is cooling, Von Nessen said the rate hikes will likely cool too, but not immediately.
“We're getting close to the inflation target of two percent. We're not there yet. But the Fed doesn't want to overshoot, which is why it's slowing the pace of rate increases," Von Nessen said. "Because remember that the negative consequence if it overreaches is that we go into recession and so that's what the Fed is clearly trying to avoid.”
Despite many prices still being higher than pre-pandemic levels, Von Nessen said it's important to remember some inflation can be good for the economy by helping drive economic growth.
"So, the key is for prices to slowly rise over time, but not at an excessive rate the way they have been over the last several years," Von Nessen said. "So, that's why getting this rate of inflation down is important.”
Contact Kayland Hagwood at khagwood@wcnc.com and follow her on Facebook, Twitter and Instagram.