Prices don't drop when inflation eases

When talking about inflation, it’s important to remember that inflation is a rate that measures how fast prices are rising. If the consumer inflation rate drops from its 40-year high of 8.6% in May, prices are still rising – just not as fast.

Consumers won’t feel immediate relief even as the inflation rate slows because many of those elevated prices are likely here to stay, said Michael Ashton, managing principal at Enduring Investments in Morristown, NJ.

“The price level has permanently changed,” said Ashton. “Until your wages catch up (to inflation), it will continue to hurt,”

And wages have a long way to climb to catch up. In May, inflation-adjusted average hourly earnings decreased a seasonally adjusted 3% from a year ago. When combined with a decrease in weekly hours worked, that resulted in a 3.9% decrease in real wages, the Bureau of Labor Statistics said.