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Inflation hits lowest level in 3 years. Here’s what that means for our economy.

Economist for UTSA’s Institute for Economic Development breaks down what the inflation drop means for the economy

SAN ANTONIO – Inflation has hit its lowest level in more than three years, a development that impacts everyone. But what does this mean for our wallets and the overall economy?

CPI report

In July, the Consumer Price Index showed a 2.9% increase for all items, the lowest rise since March 2021.

Just over two years ago, in June 2022, the Consumer Price Index was up 9%.

Here’s a chart of what those numbers have looked like over the past 20 years:

CPI report data over the past 20 years for all items (U.S. Bureau of Labor Statistics)

But what do these numbers mean for us at home?

“I think we are still going to see fluctuations,” said Tom Tunstall, an economist and senior research director at UTSA’s Institute for Economic Development. “And it will probably be a little while before we get to any sort of a steady state situation.”

Tunstall said a small amount of inflation is beneficial, and the Federal Reserve has been working to bring it down to a more comfortable level.

“Ratcheting up interest rates has caused inflation to begin to slow down,” Tunstall said. “The rate of increase is slowing. Inflation is still increasing. And in an ideal world, the Fed actually does want a little bit of inflation, but typically closer to 2%.”

However, keeping inflation in check is a delicate balance. Factors like an aging workforce could make it challenging to maintain this positive trend.

“With baby boomers retiring, it’s possible that we’ll see labor shortages down the line, whether it’s months or years ahead, which could have an inflationary impact,” Tunstall said.

Changes coming

Tunstall also pointed out that the upcoming presidential election will be crucial. The new administration may need to focus on companies with monopolistic power, as they can influence consumer prices.

“Depending on what the next administration turns out to be, engaging the Federal Trade Commission and the Department of Justice Antitrust Division to look at industry concentration,” Tunstall said.

Another significant question is what will happen to interest rates when the Fed meets in September.

“The Fed will probably continue to slowly, steadily, a quarter-point at a time, probably decrease interest rates and to in order to, you know, make sure that they don’t inadvertently cause a recession,” Tunstall said.

As we approach the Federal Reserve’s September meeting, all eyes are on potential interest rate cuts. Those decisions could lead to lower borrowing costs for mortgages, credit cards, and more.

Additionally, the following CPI data report will be released on Sept. 11.


About the Author
Ivan Herrera headshot

Ivan Herrera, MSB, has worked as a journalist in San Antonio since 2016. His work for KSAT 12 and KSAT.com includes covering consumer and money content, news of the day and trending stories.

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