Is Inflation Slowing? A Look Ahead

The Bureau of Labor Statistics CPI numbers show that prices were up 4.9% from April 2022 to April 2023. We can be pretty confident that, measured by the CPI, inflation is much lower now than when it peaked a year ago. Inflation is slowing.

Looking deeper into the numbers, the CPI rose 0.5% last month. Half a percent a month for twelve months would add up to 6% inflation for the year—a bit more than the 4.9% we saw over the past year.

Last year, the CPI rose 2.5% over just the two months of May and June, and with inflation trending downward, we can be pretty confident that the CPI won’t increase that much in May and June this year. That means the annual inflation rate will continue to trend down for the next two months.

However, the CPI in December 2022 was the same as in June. The CPI measured no inflation in the last six months of last year. That is unlikely to happen this year, so after favorable numbers are reported in July, we can expect that the year-over-year inflation numbers will be going up in the last half of 2023.

The Fed claims a target of 2% annual inflation. In the first four months of 2023, the CPI has already risen 2.2%. Despite the optimism surrounding the recent downward inflation trend, we are far from hitting the Fed’s inflationary target. After a lull in the next two months, we can expect rising annual inflation rates for the rest of the year.