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Consumers have relief, but only at very high prices.

Key Point

  • The pace of inflation has slowed steadily over the past few months.
  • A hold back in 2023 stimulus is unlikely, but not given where inflation is.
  • Unemployment and consumer spending will play a bigger role in determining whether additional stimulus is needed this year.

Inflation was a big problem for consumers in 2022. In June of that year, the Consumer Price Index (CPI), which measures changes in the cost of consumer goods, rose by 9.1% over the year.

Thankfully, however, the pace of inflation has slowed steadily since then. And the CPI in December 2022 was just 6.5%. This is historically high, but well below 9.1%.

Clearly, cooling inflation is a good thing. When people are functioning and spending less to cover their basic living expenses, they tend to start struggling and reduce their credit card debt. Will we no longer need to consider stimulus measures?

Inflation is not so important

It’s a big misconception that it’s inflation that determines whether stimulus checks hit Americans’ bank accounts. Stimulus measures are more dependent on economic conditions: unemployment and consumer spending.

With unemployment high and consumer spending starting to decline, lawmakers can use stimulus as a way to pump money into the economy to boost it when needed. If unemployment is low and consumer spending is stable, stimulus checks are usually not needed.

As such, falling inflation does not necessarily rule out 2023 stimulus considerations. But to be clear, inflation has little to do with stimulus, so whether it’s high or low is irrelevant.

That said, the fact that inflation is easing is definitely good news for consumers. Case in point: an item bought for $40 in 2020 will cost him $45 more in 2022 based on inflation. It’s a big jump.

It is too early to apply similar figures for 2023. That’s because the year is just beginning and we don’t have the latest inflation data yet. For example, data for January he doesn’t come out until February. Either way, slowing inflation is a good thing. And you need to understand that relief from the high cost of living can mean much more than just a one-time payday.

So is the 2023 stimulus check surely a no?

necessarily. A recession is always possible. that no one wants. Financial experts have been warning for months, and we cannot ignore the idea that economic conditions will deteriorate significantly.

In that case, a stimulus check could work if unemployment spikes. But that’s clearly not what everyone should want.

That said, falling inflation may be a sign that a recession may be averted. If inflation continues to slow, the Fed may put the brakes on aggressive rate hikes. This could eliminate the need for consumers to drastically cut their spending. And if spending stays stable, we can probably avoid an economic slowdown.

All in all, easing inflation is a very good thing – even if it doesn’t bring a certain amount of money into a person’s bank account.

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