The Economic Clouds Have Parted

Catherine Rampell: “My own view is that tangible improvements in recent months have made a big difference. Gasoline prices have fallen more than 80 cents per gallon since the summer. The stock market closed at record highs on Monday, partly related to expectations of interest rate cuts.”

“Inflation has been cooling for a while, and Americans have had more time to grow acclimated to the price growth they’ve experienced so far. This means there’s less sticker shock each time they go to the grocery store, and they might have stopped holding their breath for outright price declines that are unlikely to materialize. Milk around $4 per gallon is just the new normal.”

“Meanwhile, Americans’ wages have continued to rise and outpace inflation, and many consumers seem to believe inflation has finally turned a corner. Their expectations for inflation over the coming year are the lowest since December 2020 and are now broadly in the range seen over the couple of years before the pandemic.”