Inflation Anxiety Just Got a Reality Check
Expectations around price pressures and monetary policy have swung wildly over the past year. The numbers tell an optimistic story.
Tracking prices.
Photographer: Spencer Platt/Getty Images North AmericaInflation optimists were riding high at the start of 2024. Price pressures seemed to be cooling quickly, and market pricing suggested that the Federal Reserve might lower policy rates by a whopping 1.75 percentage points this year. Fast forward 11 months and we’ll be lucky if we get 1 percentage point worth. The pullback shows that we remain on high alert for inflation that could remain too high for comfort and policy that may exacerbate the problem. Despite this, there’s room for measured optimism heading into 2025.
The latest report Wednesday showed that the consumer price index rose 2.7% in November from a year earlier, matching the median forecast in a Bloomberg survey of economists. While the progress toward 2% has slowed or even stalled in recent months, a lot of that comes down to the stubborn strength of the shelter category, a familiar thorn in everyone’s side. Excluding shelter, the consumer price index is essentially already back to its pre-pandemic “normal” and has been for some 18 months. What’s left of the price volatility of 2021 and 2022 is mostly just a narrow inflation in one large and important category, rather than a broad-based phenomenon.