Inflation may have peaked, but where do we go from here?

Inflation may have finally peaked, dropping slightly from March's 40-year high, according to the U.S. Department of Labor; so what does that mean for you and the economy?  

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Many pundits are discussing the possibility of a recession, which is marked by the gross domestic product shrinking in back-to-back quarters.  

While economists debate whether a recession is likely, they do expect inflation to continue for a while, just not as sharply.

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The latest inflation report was a good news-bad news report. The Labor Department reports inflation rose 8.3% in April, dropping below the 40-year high of 8.5% in March.  

"That’s the good news. The place where we’re still worried is what’s called core inflation," explained Dr. Christopher Clarke, an economist with the University of Houston. "That’s going to include everything except food and gas and heating and energy. So that’s going to be your clothing, your rent, your services that you pay for, furniture."

In April, airfares soared a record 18%, and hotel prices jumped nearly 2%.  

Clarke says many economists place our chances for a recession in 2023 at 20% to 30%.

"I would say there’s a two-thirds chance next year is going to be a pretty good year and a one-third chance that we might see a mild recession," said Dr. Clarke.


Over the last twelve months, the Bureau of Labor Statistics reports ground beef rose 14%, bacon 17%, eggs 22%, apples 6%, and seafood nearly 12%.

The Fed has raised interest rates twice so far this year. But Dr. Clarke says it will take months to curb inflation.  

While the war in Ukraine continues to limit oil and wheat supplies, and the COVID-19 lockdown in China limits consumer goods, Dr. Clarke expects prices to keep rising, but at a slower pace.

"We’ll have to get used to the numbers we see on the price tags," he said. "But in terms of purchasing power, eventually, wages will catch up."

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For those worried, Dr. Clarke offers this advice: 

"Hold tight, be cautious," he said. "But it’s not the end of the world. Things are going to get better."

Financial advisors also say your best money moves now are to lock in a new job if you're looking for one, pay down debt, set cash aside for emergencies, and rebalance your stock portfolio if you haven't done so in a while.