There are some signs that are showing the “last mile” of the inflation fight may be more challenging, also more crucial. Inflation in the U.S. economy is on the retreat, but the road to ultimate victory may be harder than what's come already, because the so-called last mile is going to get a lot trickier.
Inflation measures how fast prices are rising for goods and services — anything from concert tickets and haircuts to groceries and furniture. Policymakers aim for a roughly 2% annual inflation target.
The consumer price index — a key inflation barometer — has fallen gradually from a 9.1% pandemic-era peak in June 2022 to 3.4% in December 2023, within striking distance of the target. Albeit the significant progress made in inflation fight, there is still a long way to go to declare victory.
One theme is clear — the transition from 8-4% inflation is easier than the transition from 4-2% inflation. This final disinflationary hurdle will be a challenge without curtailing economic growth and risking recession, a dynamic that would likely crimp consumer demand and rein in prices.
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