Why Prices Rise (and When They Don’t)
Inflation is a rate—not a reset button. Here’s how CPI, PCE, and “core” measures work, why prices can stay high, and what to watch next.
By TheMurrow Editorial
February 7, 2026
Key Points
- 1Separate rates from levels: disinflation slows increases, but prices usually stay high unless inflation turns negative across the whole basket.
- 2Compare CPI vs PCE: CPI uses a fixed basket for headlines; PCE reflects substitution and is the Fed’s favored gauge for its target.
- 3Read inflation like a pro: watch core and trimmed-mean measures, track your biggest categories, and note revisions and release-calendar quirks.
Prices can stop rising fast and still feel unbearably high.
That’s the emotional trap of the early-to-mid 2020s: households were told “inflation is coming down,” then looked at grocery receipts and rent notices and wondered whether someone was lying. The numbers weren’t lying. The language was.
Inflation is a rate. When that rate falls, the price level usually doesn’t fall with it—it just climbs more slowly. For families budgeting in real time, that distinction isn’t academic. It’s the difference between “things are getting worse less quickly” and “things are getting better.”
Understanding inflation and deflation starts with one honest premise: no single statistic captures everyone’s cost of living. Economists use a toolkit of measures because the economy is complicated. Your wallet is complicated, too.
“When people say ‘inflation is down,’ they often mean the speed of price increases slowed—not that prices went back to where they were.”
— — TheMurrow Editorial
Inflation, deflation, and the most common misunderstanding
Inflation means a broad rise in prices across many goods and services over time. It’s not “eggs got expensive.” It’s “many categories got more expensive, month after month,” so each dollar buys less.
Deflation is the reverse: a broad fall in prices that increases the purchasing power of money. That sounds pleasant until you remember that deflation often arrives with weak demand, debt stress, and layoffs. When prices and wages fall together, the “cheaper stuff” story can turn into a recession story.
A third term matters because it fuels endless confusion: disinflation. Disinflation means inflation is still positive—prices are still rising—but the rate is slowing. Headlines that say “inflation falls” commonly describe disinflation, not deflation.
Deflation is the reverse: a broad fall in prices that increases the purchasing power of money. That sounds pleasant until you remember that deflation often arrives with weak demand, debt stress, and layoffs. When prices and wages fall together, the “cheaper stuff” story can turn into a recession story.
A third term matters because it fuels endless confusion: disinflation. Disinflation means inflation is still positive—prices are still rising—but the rate is slowing. Headlines that say “inflation falls” commonly describe disinflation, not deflation.
Relative prices are not inflation
A spike in one category can be painful without being “inflation” in the macro sense. If rent jumps while other prices stay flat, that’s a relative price change. Inflation is the aggregate phenomenon across the whole basket.
That difference matters for policy and for your expectations. A relative jump can reverse (or not) depending on its cause. Broad inflation reflects economy-wide forces—spending, wages, and supply constraints—that move more slowly.
That difference matters for policy and for your expectations. A relative jump can reverse (or not) depending on its cause. Broad inflation reflects economy-wide forces—spending, wages, and supply constraints—that move more slowly.
Why some prices “never came back down”
Supply shocks and bottlenecks can lift the price level and then fade, leaving a new plateau. Inflation can normalize while the higher price level remains. That’s not a trick; it’s how compounding works. A 20% jump followed by years of 2% inflation still leaves you staring at the higher base.
“Inflation can cool without delivering the thing households want most: a lower price level.”
— — TheMurrow Editorial
How inflation is measured—and why people argue about the numbers
Inflation is not observed directly; it’s inferred from indexes. Different indexes answer different questions, and the differences can be big enough to shape public trust.
In the U.S., the two measures that dominate the conversation are CPI and PCE. Both track price changes over time. They don’t use the same recipe.
In the U.S., the two measures that dominate the conversation are CPI and PCE. Both track price changes over time. They don’t use the same recipe.
CPI: the number households hear most often
The Consumer Price Index (CPI), produced by the Bureau of Labor Statistics (BLS), tracks the cost of a fixed “basket” purchased by urban consumers. It’s the figure that shows up in headlines and in many cost-of-living adjustments.
The mechanics matter because they shape what people think is “real.” CPI is designed to be a public-facing yardstick. It’s not designed to be a personalized inflation rate for every household in every zip code.
A practical, current example: CPI reporting itself can be affected by the calendar. Due to a schedule disruption, publication of January 2026 CPI has been delayed to February 13, 2026, affecting what counts as the “latest” inflation read in markets and news coverage (MarketWatch). That’s not a change in inflation; it’s a reminder that even the inflation conversation runs on release schedules.
The mechanics matter because they shape what people think is “real.” CPI is designed to be a public-facing yardstick. It’s not designed to be a personalized inflation rate for every household in every zip code.
A practical, current example: CPI reporting itself can be affected by the calendar. Due to a schedule disruption, publication of January 2026 CPI has been delayed to February 13, 2026, affecting what counts as the “latest” inflation read in markets and news coverage (MarketWatch). That’s not a change in inflation; it’s a reminder that even the inflation conversation runs on release schedules.
Seasonal adjustment, revisions, and why January always feels weird
Every January, BLS updates seasonal adjustment factors. For the January 2026 release, BLS has said recalculated seasonal factors and revised indexes for January 2021 through December 2025 will be made available February 13, 2026 (BLS). Revisions like these can change seasonally adjusted series for prior years.
BLS has also flagged CPI publication changes around the January 2026 data—such as series title changes and discontinuation of certain file formats (BLS). That won’t change what you pay at the store, but it can change how analysts handle the data.
BLS has also flagged CPI publication changes around the January 2026 data—such as series title changes and discontinuation of certain file formats (BLS). That won’t change what you pay at the store, but it can change how analysts handle the data.
Feb. 13, 2026
January 2026 CPI is scheduled for Feb. 13, 2026 release due to a delay—an unusual timing shift that can shape “latest inflation” narratives. (MarketWatch/BLS)
PCE: why the Fed prefers it—and what that signals
The Federal Reserve has been unusually clear about its target: 2% inflation over the longer run. The Fed’s policy statements repeatedly frame that goal explicitly (Federal Reserve, Jan. 28, 2026 release).
When policymakers talk about hitting 2%, they generally emphasize PCE inflation—the Personal Consumption Expenditures price index produced by the Bureau of Economic Analysis (BEA). PCE is designed to capture shifts in consumer behavior more than CPI does. When one item gets expensive, people substitute; PCE aims to reflect that substitution.
When policymakers talk about hitting 2%, they generally emphasize PCE inflation—the Personal Consumption Expenditures price index produced by the Bureau of Economic Analysis (BEA). PCE is designed to capture shifts in consumer behavior more than CPI does. When one item gets expensive, people substitute; PCE aims to reflect that substitution.
What PCE is trying to measure
PCE is less about the “fixed basket” concept and more about what households actually end up buying as prices move. For central bankers trying to gauge the economy’s underlying temperature, that can be useful.
Even the release schedule can be fluid. On BEA’s core PCE page, the “Next release” field can show “To be rescheduled,” a subtle but important point for readers: “latest” is sometimes a function of calendars, not clarity.
Even the release schedule can be fluid. On BEA’s core PCE page, the “Next release” field can show “To be rescheduled,” a subtle but important point for readers: “latest” is sometimes a function of calendars, not clarity.
2%
The Fed’s stated inflation goal is 2% over the longer run—and the institution often emphasizes PCE when explaining and evaluating that goal. (Federal Reserve)
Why 2% and not zero?
A 2% target is not a celebration of rising prices. It reflects tradeoffs: a small positive inflation rate can act as a buffer against deflation, allow wages to adjust in real terms without requiring nominal pay cuts, and give central banks room to cut rates in downturns.
Critics argue that any intentional inflation erodes purchasing power and credibility. Defenders argue that a hard zero target raises the risk of deflation traps, where falling prices and weak demand reinforce each other.
Critics argue that any intentional inflation erodes purchasing power and credibility. Defenders argue that a hard zero target raises the risk of deflation traps, where falling prices and weak demand reinforce each other.
“A 2% target isn’t a love letter to higher prices. It’s a guardrail against the far more dangerous problem: deflation with weak demand.”
— — TheMurrow Editorial
Core inflation, “underlying” inflation, and why people hate the idea
Many inflation reports highlight core measures—typically excluding food and energy. The justification is straightforward: food and energy prices can be volatile, and policymakers don’t want to overreact to temporary swings they can’t control with interest rates.
The public backlash is just as straightforward. Food and energy aren’t “optional” in a household budget, so excluding them can feel like a technocratic dodge.
The public backlash is just as straightforward. Food and energy aren’t “optional” in a household budget, so excluding them can feel like a technocratic dodge.
The honest defense of core measures
Core measures are not meant to minimize lived experience. They’re meant to identify persistent trends. When a central bank changes interest rates, the goal is to influence demand and expectations over time, not to chase every oil-price move.
Core inflation can also help when one category spikes and then reverses. A whipsaw in gasoline might dominate a headline but say little about broader price-setting behavior.
Core inflation can also help when one category spikes and then reverses. A whipsaw in gasoline might dominate a headline but say little about broader price-setting behavior.
Beyond core: trimmed mean approaches
Economists also use measures that remove extreme moves in either direction. The Dallas Fed’s Trimmed Mean PCE is one example, built on BEA’s PCE data and designed to estimate the underlying trend by trimming outliers (Dallas Fed).
The value to readers isn’t the formula; it’s the concept. There isn’t one sacred inflation number. There are tools, each designed for a different decision.
The value to readers isn’t the formula; it’s the concept. There isn’t one sacred inflation number. There are tools, each designed for a different decision.
Trimmed Mean PCE
The Dallas Fed publishes a Trimmed Mean PCE measure that trims extreme price moves to estimate underlying inflation. (Dallas Fed)
Why prices rise: demand, costs, supply, and feedback loops
Inflation has multiple parents. The simplest mental model separates four forces: demand-pull, cost-push, supply shocks, and wage–price dynamics. Real-world episodes often mix all four.
Demand-pull: too much spending chasing too few goods
When households, businesses, and governments spend faster than the economy’s capacity to produce, companies can raise prices without losing customers. Signs include strong consumption, tight labor markets, and accelerating wages.
Demand-driven inflation tends to respond to tighter monetary policy over time, because higher interest rates cool borrowing, hiring, and spending. It’s also the type of inflation that most closely resembles the textbook story.
Demand-driven inflation tends to respond to tighter monetary policy over time, because higher interest rates cool borrowing, hiring, and spending. It’s also the type of inflation that most closely resembles the textbook story.
Cost-push: input prices rise and firms pass them along
Energy, food commodities, shipping costs, imported inputs—these can force price increases even if demand isn’t booming. Cost-push inflation feels unfair because it often arrives as a surcharge on basics.
It also helps explain why “inflation came down” doesn’t always translate into relief. If costs rise sharply and then stabilize, inflation can slow while prices remain elevated.
It also helps explain why “inflation came down” doesn’t always translate into relief. If costs rise sharply and then stabilize, inflation can slow while prices remain elevated.
Supply shocks and bottlenecks: the missing piece in many arguments
Supply constraints can raise prices even without classic “overheating.” If housing supply is tight, rents can rise broadly. If critical components are scarce, durable goods can surge.
A key nuance: supply-driven inflation often doesn’t reverse quickly. When bottlenecks ease, the inflation rate may normalize, but the level may not drop back. Many households interpret that as permanence because, in practice, it often is.
A key nuance: supply-driven inflation often doesn’t reverse quickly. When bottlenecks ease, the inflation rate may normalize, but the level may not drop back. Many households interpret that as permanence because, in practice, it often is.
Deflation: why “cheaper” can be a trap
Deflation gets romanticized in casual conversation: imagine everything costs less next month. For a household living paycheck to paycheck, that sounds like relief.
The macroeconomy works differently. Broad deflation is often associated with weak demand and financial stress. When prices fall, revenues fall. Businesses cut hours and jobs. Wages can stagnate or decline. Debts, however, remain fixed in nominal terms.
The macroeconomy works differently. Broad deflation is often associated with weak demand and financial stress. When prices fall, revenues fall. Businesses cut hours and jobs. Wages can stagnate or decline. Debts, however, remain fixed in nominal terms.
The debt problem: real burdens rise
Inflation reduces the real (inflation-adjusted) burden of nominal debts. Deflation increases it. A mortgage payment doesn’t shrink because the price level falls; its real weight grows.
That dynamic can trigger a negative feedback loop: households and firms reduce spending to service debt, demand falls further, prices fall more, and the cycle continues.
That dynamic can trigger a negative feedback loop: households and firms reduce spending to service debt, demand falls further, prices fall more, and the cycle continues.
Why central banks fear deflation more than modest inflation
For policymakers, modest inflation is a manageable problem. Deflation can be harder to escape, especially if interest rates are already low. That’s one reason a 2% target exists: it creates distance from the zero line.
None of this means households should celebrate inflation. It means “deflation is good” is not a serious economic plan; it’s a partial description of one symptom.
None of this means households should celebrate inflation. It means “deflation is good” is not a serious economic plan; it’s a partial description of one symptom.
What the inflation debate means for your wallet
People don’t experience “the CPI.” They experience rent renewals, grocery aisles, car insurance bills, and wage negotiations. The gap between official measures and personal budgets isn’t automatically a scandal; it’s often composition.
Why your inflation rate may differ from the headline
Households spend different shares on:
- Housing (rent, mortgage-related costs, utilities)
- Transportation (gas, car prices, repairs)
- Food
- Healthcare
- Childcare and education
If your biggest category rises faster than average, your lived inflation is higher than the index. If you can substitute easily—changing brands, delaying purchases—your personal inflation may look closer to a PCE-like experience.
- Housing (rent, mortgage-related costs, utilities)
- Transportation (gas, car prices, repairs)
- Food
- Healthcare
- Childcare and education
If your biggest category rises faster than average, your lived inflation is higher than the index. If you can substitute easily—changing brands, delaying purchases—your personal inflation may look closer to a PCE-like experience.
Practical takeaways
- ✓Separate levels from rates. A falling inflation rate doesn’t promise lower prices; it promises slower increases.
- ✓Track your top three categories. For many households, housing, food, and transportation dominate.
- ✓Use multiple indicators. CPI is widely cited; PCE shapes Fed policy; core and trimmed-mean measures hint at persistence.
- ✓Watch the calendar. Data releases can shift, revisions can happen, and January updates can reframe recent history without changing what you paid.
Jan. 2021–Dec. 2025
BLS will publish revised seasonally adjusted CPI series reflecting updated seasonal factors for Jan. 2021–Dec. 2025 alongside the January 2026 data on Feb. 13, 2026. (BLS)
Reading inflation news like an adult: a short field guide
Inflation coverage often fails readers by treating one number as a verdict. Better coverage—and better citizen understanding—requires questions.
Ask what measure is being cited
If the story cites CPI, remember it’s a fixed basket and heavily used for public communication. If it cites PCE, remember it reflects substitution more and is emphasized by the Fed in pursuit of its 2% goal.
If it cites “core,” understand the intent: reduce volatility. If it cites trimmed mean measures like the Dallas Fed’s Trimmed Mean PCE, recognize the goal: estimate underlying trend by filtering out extremes.
If it cites “core,” understand the intent: reduce volatility. If it cites trimmed mean measures like the Dallas Fed’s Trimmed Mean PCE, recognize the goal: estimate underlying trend by filtering out extremes.
Ask whether the story is about inflation or price levels
If prices rose sharply and then inflation cooled, both statements can be true. If inflation turns negative, that’s deflation—but the economic context matters. Falling prices during growth and productivity booms differ from falling prices during debt stress and layoffs.
Ask what could plausibly change next
Monetary policy can influence demand over time. It can’t fix a broken supply chain overnight. It can’t manufacture housing units. It can’t stop a global energy shock. The more an inflation episode is supply-driven, the more careful readers should be about promises of quick reversal.
The inflation debate is often framed as a fight between “official reality” and “lived reality.” A more accurate frame is that we’re measuring a complex economy with imperfect tools. The numbers are useful. They aren’t personal.
The smartest way to hold the system accountable is not to reject the data, but to demand clarity: rate versus level, broad inflation versus relative changes, and which index is being used for which purpose. Adults can handle that complexity. The economy requires it.
1) If inflation is down, why are prices still high?
Because inflation measures the rate of change, not the price level. Disinflation means prices are still rising, just more slowly. After a big jump, “normal” inflation builds on the new, higher base. That’s why groceries or rent can feel stuck at a higher plateau even when the headline rate cools.
2) What’s the difference between CPI and PCE?
CPI (BLS) tracks a fixed basket of goods and services purchased by urban consumers and is the most public-facing measure. PCE (BEA) is the Fed’s preferred gauge and aims to capture substitution—how consumers shift spending when prices change. Both track inflation, but they’re built for different purposes.
3) Why does the Fed target 2% inflation instead of 0%?
The Federal Reserve’s stated goal is 2% inflation over the longer run. A small positive rate reduces the risk of deflation, helps wages adjust without requiring nominal pay cuts, and gives policymakers room to cut interest rates in downturns. Critics worry it normalizes erosion of purchasing power; supporters see it as a stabilizing buffer.
4) Is deflation good because it makes things cheaper?
Not usually. Broad deflation is often linked to weak demand, falling revenues, layoffs, and rising real debt burdens. Cheaper prices can come with weaker wages and tighter job prospects. The combination can push households and firms to delay spending, which can deepen the downturn.
5) Why do economists talk about “core” inflation when food and energy matter most?
Core inflation typically excludes food and energy because those categories can swing sharply and obscure underlying trends. Policymakers use core to avoid overreacting to short-term volatility. Skeptics argue it feels detached from household reality; the best approach is to watch both headline and core, understanding what each is designed to show.
6) What is “trimmed mean” inflation?
Trimmed mean measures remove extreme price changes—both high and low—to estimate underlying inflation. The Dallas Fed’s Trimmed Mean PCE is a prominent example built from BEA’s PCE data. It’s not meant to replace headline inflation; it’s meant to reveal whether broad price pressures are spreading beyond a few volatile categories.
7) Why do inflation numbers get revised or released on different dates?
Inflation data depend on large collection systems and statistical adjustments. BLS updates seasonal adjustment factors annually, and for January 2026 it will provide revised seasonally adjusted series for Jan. 2021–Dec. 2025 on Feb. 13, 2026. Release schedules can also shift, affecting what counts as the “latest” reading in the news.
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About the Author
TheMurrow Editorial is a writer for TheMurrow covering explainers.
Frequently Asked Questions
If inflation is down, why are prices still high?
Because inflation measures the rate of change, not the price level. Disinflation means prices are still rising, just more slowly. After a big jump, “normal” inflation builds on the new, higher base. That’s why groceries or rent can feel stuck at a higher plateau even when the headline rate cools.
What’s the difference between CPI and PCE?
CPI (BLS) tracks a fixed basket of goods and services purchased by urban consumers and is the most public-facing measure. PCE (BEA) is the Fed’s preferred gauge and aims to capture substitution—how consumers shift spending when prices change. Both track inflation, but they’re built for different purposes.
Why does the Fed target 2% inflation instead of 0%?
The Federal Reserve’s stated goal is 2% inflation over the longer run. A small positive rate reduces the risk of deflation, helps wages adjust without requiring nominal pay cuts, and gives policymakers room to cut interest rates in downturns. Critics worry it normalizes erosion of purchasing power; supporters see it as a stabilizing buffer.
Is deflation good because it makes things cheaper?
Not usually. Broad deflation is often linked to weak demand, falling revenues, layoffs, and rising real debt burdens. Cheaper prices can come with weaker wages and tighter job prospects. The combination can push households and firms to delay spending, which can deepen the downturn.
Why do economists talk about “core” inflation when food and energy matter most?
Core inflation typically excludes food and energy because those categories can swing sharply and obscure underlying trends. Policymakers use core to avoid overreacting to short-term volatility. Skeptics argue it feels detached from household reality; the best approach is to watch both headline and core, understanding what each is designed to show.
Why do inflation numbers get revised or released on different dates?
Inflation data depend on large collection systems and statistical adjustments. BLS updates seasonal adjustment factors annually, and for January 2026 it will provide revised seasonally adjusted series for Jan. 2021–Dec. 2025 on Feb. 13, 2026. Release schedules can also shift, affecting what counts as the “latest” reading in the news.
