Despite declining inflation, consumers are still suffering from the crisis

Grocery store prices are nearly 25 percent higher than reported before the pandemic.

The Consumer Price Index (CPI) report released on Wednesday shows a slowdown in the inflation rate, but does not bring much relief to consumers when shopping for groceries.

According to CPI data from the U.S. Bureau of Labor Statistics, prices rose 2.9 percent over the trailing 12 months through July, below economists' forecast of 3 percent. It is the smallest increase since March 2021.

“Breaking the three percent mark is a critical psychological advantage,” Sung Won Sohn, professor of finance and economics at Loyola Marymount University and chief economist at SS Economics, told CNN.

While slowing inflation due to rapidly rising prices could be good news for consumers' wallets, economists agree that it is unlikely to lead to falling prices at the grocery store.

“When inflation falls, it means that the rate at which prices are rising is slowing. But generally, that doesn't mean prices are falling,” William Hauk, an associate professor in the University of South Carolina's economics department, told CNN.

Inflation cools down, but prices rise

In 2022, the U.S. experienced one of the highest inflation rates in 40 years. According to CPI data, grocery prices are now nearly 25 percent higher than before the pandemic.

“Prices are still rising,” said Kyle McDonald, CEO of Louisiana-based Argent Trust Group, a trust company that manages more than $85 million in client assets. “In the grocery store … prices for our everyday products have risen dramatically. It's hard economically and financially for modest families.”

The new inflation data reinforces investors' belief that the US Federal Reserve's monetary policy meeting on September 17 and 18 will see a first interest rate cut, although perhaps not by the expected half a percentage point.

Economists expect the rate cut to be 0.25 percent to reduce borrowing costs, which would signal the first change in direction since July 2023.

The Fed has maintained its standard overnight interest rate in the current range of 5.25 to 5.50 percent. Inflation has pushed interest rates to a 23-year high. The interest rate trend primarily reflects the rise in the unemployment rate, which rose to a three-year high of 4.3 percent last month.

— Article courtesy of Lynne Jeter of the Magnolia Tribune —