Despite the lower-than-expected inflation rate announced on Thursday, the cost of everyday goods and services remains much higher than at the start of the decade.
Prices rose 2.7% over the past year, according to the Consumer Price Index, which tracks changes in the prices of everyday items such as food, housing, clothing, health care and transportation.
That’s a sharper-than-expected slowdown from October’s 3% pace, and inflation remains above the Fed’s target since March 2021, although it is closer to the Fed’s 2% target.
Scott Anderson, chief U.S. economist at BMO Harris Bank, said the cumulative effect of these increases continues to pressure household budgets.
“We’re all comparing our grocery bills to what our money could buy in 2019, and we can’t walk away with that warm fuzzy feeling,” Anderson told CNBC Make It.
Based on CPI data, overall prices have risen by about 25% since January 2020, more than double the cumulative inflation rate of about 10% seen in the previous five years.
feel the pinch
According to a July 2025 report from Brookings University, wages have been roughly in line with inflation since 2020, according to most federal income measures. Still, not all workers realized these benefits, Anderson said.
“In industries such as financial services, information services and manufacturing, higher-skilled workers tend to see higher wage increases than lower-skilled workers,” he says.
This uneven pattern may help explain why confidence remains weak despite relatively low unemployment and steady overall wage growth.
According to a monthly survey conducted by the University of Michigan, consumer confidence, which is closely watched as a measure of household financial confidence, is near an all-time low. The survey asks households how their finances are doing compared to a year ago, whether they expect their finances to improve over the next year, and whether now is a good time to make a major purchase.
The latest index reading fell to 51 in November, a level last seen during the inflation surge in 2022, when year-on-year inflation peaked at 9.1%.
Similarly, a recent Bankrate survey found that 32% of Americans expect their finances to worsen in 2026, the highest level of pessimism since the annual survey began in 2018. Inflation stands out as the top concern, cited by nearly two-thirds of respondents, far more than income, debt and interest rates.
“The cost of living still feels like it’s going up for households who are paying much more for food, utilities and housing than they were in years before inflation spiked,” said Atsi Sheth, chief credit officer at Moody’s Ratings.
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