Inflation rates are trending downward

Inflation is trending downward almost reaching levels seen prior to 2021 and the Covid-19 pandemic. 

According to a chart produced by J.P.Morgan, inflation for things such as energy, food at home, shelter, core goods, dining, recreation and other services, as well as auto insurance started to increase dramatically in early 2021.

Energy peaked in June 2022 with a 9.1 percent inflation rate. That same measurement was as low as -2 percent roughly two years before that. 

While energy saw the most significant increase, other categories showed a similar trend, meaning consumers felt the impact of higher prices. 

The inflation rate has been trending downward again, however, and in November of 2025, while still higher than what it was pre-pandemic, the inflation rate for energy was at 2.7 percent. Most other categories continued on the decreasing trend of inflation rates, except for core goods, which got below zero at one point from early to mid 2024, but now closer to that 2.7 percent mark. 

Joe Mahon, economist and regional outreach director with the Federal Reserve Bank of Minneapolis, spoke with The Lakeland Times recently to share his opinions on the trends of inflation rates. 

A majority of northern Wisconsin falls within the jurisdiction of the Federal Reserve Bank of Minneapolis and the rest of the state falls within the jurisdiction of the Federal Reserve Bank of Chicago. 

Mahon said his initial reaction to seeing inflation levels comes more from a consumer’s point of view rather than an economist. 

He said he felt the impacts of higher prices just like everyone else and said inflation rates were the highest he’s ever seen in his life during the peak in the middle of 2022. 

“And as somebody who, even though my focus is on kind of what’s happening here and now in our region, I have sort of … a novice’s interest in economic history,” Mahon said. “And so it was interesting to me because this is the first time in my life that I really lived through an extreme inflation event like this. I’m in my 40s. I know academically that when I was a small child inflation rates … had been recently this high, but never really experienced this kind of rapid price growth.”

He said he felt like even when inflation rates began to cool off into 2024, it still felt like prices were high. 

“You don’t necessarily think in year over year terms for your own buying habits, right?” Mahon said. “And then, you know, even during that period where the inflation rate overall was coming down, you can see the price of food was rising at a pretty good clip. And that was I think something that a lot of people were experiencing because grocery bills and especially food away from home … was really rising a lot and continues to rise faster than the overall rate of inflation.”

He said while inflation can be forecasted, Mahon indicated it can be tricky because there’s more than one way to do that. Additionally, he said, simply put; predicting the future for anything can be difficult. 

Mahon said the pandemic, obviously, was the “biggest and quickest shock that hit the economy in our lifetimes.”

“A lot of the ways that people normally spend their money back in 2020 and into 2021, they weren’t making those purchases,” he said. “So that kind of meant that they had a lot of extra cash sitting around, meanwhile, you want to talk about government policy, there was some stimulus … waves … and both of those things led to a big surge in consumer goods purchases, which no one really saw coming at the beginning of the pandemic.”

Then a global supply chain breakdown occurred, Mahon pointed out, which aided in “a perfect storm” that resulted in increased costs. 

He continued, explaining that as people began venturing back out into the world and normal spending habits were starting up again, Russia invaded Ukraine which impacted oil prices and grain prices, among other things. 

Mahon said he felt policymakers and economists at the time were thinking what was happening would be only a “temporary phenomenon.”

“As the supply chain crisis eases, as people go back to spending money in the normal ways that they spend, as we get through that boom and bust … in prices, things will just kind of even out,” he said. “But then what happened is inflation became sort of more widespread and it wasn’t just concentrated in a few important categories.”

As a result, Mahon said the Federal Open Market Committee of the Federal Reserve Bank “really started to aggressively typing monetary policy at that time.”

“Because it was clear that inflation was becoming more widespread,” he said. “It was accelerating. It was getting faster in 2022 and something needed to be done to get it under control.”

Mahon said most inflation consumers experience is in the form of services. 

“So what we see now, even though the overall rate of inflation is higher than what we wanted to see, the composition of inflation — what’s causing inflation — is more normal,” he said. “It’s what we more normally expect to see, which has very little influence from goods. Food and energy prices are more volatile because you can have things like wars or supply shocks, droughts and things like that that make them move around. They’re more likely to come down than a lot of other prices too.”

Mahon said he feels the composition of inflation right now, that he explained, is a “good sign.”

Inflation, he said, isn’t something that naturally stabilizes itself. 

“I mean this is something that there is actually like a current area of research and inquiry and economics and there’s sort of a long tradition of people … we’ll just say arguing about what causes inflation ultimately and how to control it,” Mahon said. “You know the Federal Reserve has, as part of its … two big goals in making monetary policy … one is employment; we want to make sure the labor market’s operating and everyone can get a job. And the other is affordability; we want to make sure inflation is low. So I wouldn’t say that inflation sort of just takes care of itself over time.”

He said there’s a “pop in goods prices” currently.

“Well a lot of that is tariff driven,” Mahon said. “Because a lot of our goods are either made overseas or made with very important imports that come from overseas and so we’re starting to see some of that feed through to prices. Again, an active area of debate (is) about how much tariffs are inflationary. Like if the government increases the tariff rate … that could just be a one time bump in prices and then we’ll see it back down or maybe it will be a more long lasting phenomenon.”

Tariffs are a tax, he said, and that means tariffs are essentially “a fiscal policy.”

“And that taxes are disinflationary as a fiscal policy,” Mahon said. “So it kind of moves in both directions. But all this is to say this is something that’s always changing. It doesn’t just take care of itself and partly it’s because there’s a lot of sort of market based and global things that drive inflation. And, also, inflation is a monetary phenomenon so that’s part of why we have a central bank whose job it is to conduct monetary policy and try and keep it under control.”

Trevor Greene may be reached via email at [email protected].