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Americans are feeling a little bit better about inflation as gasoline prices fall


Americans are feeling a little bit better about inflation and now we have some numbers to see where things are going. NPR's Scott Horsley joins us now. Scott, good morning.

SCOTT HORSLEY, BYLINE: Good morning, Steve.

INSKEEP: What are you learning?

HORSLEY: Well, people are starting to notice that inflation has cooled off a lot. Every month, the Federal Reserve Bank of New York does a survey of where people think inflation is going. And the most recent numbers from December show a pretty good sized improvement. In fact, people's outlook of where inflation is going to be a year from now is the lowest it's been since January of 2021. That's back before all the price hikes spawned by the pandemic and the war in Ukraine. A lot of that improvement in people's outlook is probably due to falling gas prices. Historically, gas prices are a big driver of people's overall feelings about the economy. And so as pump prices have come back to more normal levels, anxiety about the cost of living seems to be easing just a bit.

INSKEEP: OK. You've touched on a couple of things like gas prices that can be a factor in inflation or people's perception of inflation. What is the latest number on inflation from December say?

HORSLEY: Inflation actually ticked up a little bit last month. Annual inflation was 3.4% in December, compared to 3.1% the month before. That downward trend in gas prices was briefly interrupted last month when the Houthi rebels made attacks in the Red Sea that disrupted shipping.


HORSLEY: Those shipping concerns haven't gone away, but we've seen gas prices moving down again around the country. We're also seeing some moderation in grocery inflation. If you strip out those volatile food and energy prices, so-called core inflation continues to trend downwards but only slowly. You know, the cost of goods has generally been flat or down in recent months. But services inflation is proving more persistent. Shelter cost alone accounted for more than half the monthly rise in the cost of living last month.

INSKEEP: Shelter costs. We're talking about mortgages. We're talking about rents. What's happening with rents?

HORSLEY: The good news is that rents around the country are beginning to level off, but that takes time to show up in the official government data. Rents soared in the first couple of years after the pandemic started, especially in places like Phoenix and Austin. You know, you had a lot of people moving to the Sun Belt, in some cases, working remotely. Not surprisingly, builders responded to those soaring rents by putting up a whole lot of new apartments. Austin added 25,000 new apartments last year. Phoenix added 13,000. Bruce McClenny, who tracks the rental market for a company called MRI Apartment Data, says as those new units have opened, rents have stabilized and in some cases, even come down a little bit.

BRUCE MCCLENNY: We've all gotten a great education, unfortunately, on supply and demand. And so it's just these swings where, you know, all of a sudden, we've got more units than we had in a really quick period. And so the prices are coming down.

HORSLEY: Across the country, you're now saying about a third of all apartments are offering some kind of concession to get tenants in the door.

INSKEEP: I've gotten the impression from statements of the Federal Reserve that they're feeling better and better about the course of inflation, but are they done battling inflation?

HORSLEY: No. Not yet. The central bank would like to see inflation closer to 2%, which is low enough that people don't really have to think about it. And today's number suggests getting there could take a bit longer. Raphael Bostic, who heads the Atlanta Fed, says he and his colleagues on the rate-setting committee are encouraged by what they're seeing, but they're not taking success for granted.

RAPHAEL BOSTIC: The pandemic has thrown curveballs repeatedly, and so I'm not comfortable even contemplating declaring victory.

HORSLEY: You know, the Federal Reserve has signaled that they're probably done raising interest rates. And at some point this year, the fed is expected to start cutting rates. But today's data suggests the central bank won't be in a hurry to do so.

INSKEEP: NPR's Scott Horsley. Thanks, as always, for your insights.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Steve Inskeep is a host of NPR's Morning Edition, as well as NPR's morning news podcast Up First.
Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.