Stimulus Update: No Payday in Sight, but There’s Relief From Inflation

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There’s some good news. 

Many consumers struggled financially from the start of 2022 through the end of it. And a big reason largely boils down to inflation.

Prior to 2022, many consumers lived paycheck to paycheck without any money in savings. As a result, a lot of people were forced to rely on credit cards to keep up with their basic bills last year.

Because things got so tough in 2022, many states stepped up and offered stimulus checks to eligible residents. But there was no federal stimulus aid made available to the public. And at this point, a federal stimulus round during the first half of 2023 seems unlikely. In fact, there’s a good chance we won’t see federal stimulus aid at all in 2023.

That may not be the news cash-strapped consumers want to hear. But the news isn’t all bleak. The Bureau of Labor Statistics just released inflation data for the month of December. And it could spell relief for a lot of people.

Inflation is finally easing

In December, the rate of inflation from one month to the next fell for the first time in almost three years. The Consumer Price Index (CPI), which measures changes in the cost of consumer goods, dropped 0.1% in December compared to November. The last time the index fell on a monthly basis was May of 2020.

Meanwhile, the annual rate of inflation dropped from 7.1% in November to 6.5% in December. That’s the smallest annual increase since May 2021.

Now to be clear, an annual rate of inflation of 6.5% is still very high, historically speaking. In fact, the Federal Reserve plans to continue raising interest rates until it sees inflation head closer to the 2% mark, which is more in line with what annual inflation looked like prior to the pandemic.

But still, 6.5% inflation is far better than 9.1% inflation, which is where levels peaked in mid-2022. And if the rate of inflation continues to trend downward, it could make it so a lot more consumers are able to manage on the income they have access to rather than keep racking up debt.

Is a 2023 stimulus check out of the question?

It’s not out of the question, but it’s also pretty unlikely. Right now, the national unemployment rate is very low, and there’s no sign that we’re on the cusp of a recession based on consumer spending data.

Now that could change in the coming months, especially if the Federal Reserve continues to raise interest rates. But December’s encouraging inflation data could prompt the Fed to go easy on its next rate hike, making a recession less likely.

Of course, a recession isn’t something anyone should hope for, as it has the potential to do a lot more damage than an extended period of inflation. So for that reason, consumers should actually hope there’s no federal stimulus round in 2023, and rather, should focus their energy on hoping that inflation levels will continue to recede.

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