Will Slowing Inflation Take Stimulus Aid Off the Table for 2023?

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There is relief for consumers — but only at higher prices.

Important point

  • Inflation has moderated in recent months.
  • A 2023 stimulus check is unlikely – but not because of where inflation is.
  • Unemployment and consumer spending will play a bigger role in determining whether or not more stimulus is needed this year.

Inflation is a major issue for consumers in 2022. In June of that year, the Consumer Price Index (CPI), which measures changes in the price of goods customers, rose 9.1% year-on-year.

Fortunately, inflation has continued to decline since then. And in December 2022, the CPI came in at just 6.5%. Currently, this is still a high reading on a historical basis, but is significantly lower than the 9.1%.

Now it is clear that cost reduction is a good thing. If the cost is low for people who work and cover basic living expenses, they may begin to struggle and save less money on their credit cards. But will slowing inflation put stimulus checks on the table for 2023?

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Inflation doesn’t matter much

It’s a big misconception that inflation dictates whether or not stimulus checks apply to US bank accounts. Instead, the stimulus aid depends on the economy – namely unemployment and consumer spending.

As unemployment levels rise and consumer spending begins to decline, lawmakers can use stimulus checks as a way to pump money into the economy to boost it as needed. When the unemployment rate is low and consumer spending continues to grow, stimulus checks are generally unnecessary — why would they be?

This is why inflation does not have to remove the stimulus aid in 2023. But what is clear is that inflation has nothing to do with the stimulus check, so whether it is high or low almost meaningless.

That is, the fact that the cost of living is falling is good news for consumers. An example: An item purchased in 2020 for $40 may cost more than $45 in 2022 based on inflation. That’s a huge leap.

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It is too late to apply the same numbers for 2023 because, we have just started the year and we don’t have inflation data yet. For example, the January documents will not be released until February. But in any case, cost reduction is a good thing. And anyone struggling with not getting a stimulus check should realize that the relief from inflation can be much more than a one-time paycheck.

So is the 2023 stimulus check uncertain?

Not necessarily. There is always the possibility of a recession — something no one likes. Financial experts have warned one for several months, so we can not eliminate the idea of ​​the economy deteriorating to an extraordinary degree.

In that case, there may be a stimulus check if the unemployment rate rises. But of course, this is not something that people should wish for.

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That said, cooling inflation may be a sign that we can get out of recession. If inflation continues to slow, the Federal Reserve may push the brakes on aggressive interest rate hikes. This can make consumers less likely to cut costs. And if spending doesn’t change, we might avoid a recession.

All in all, easing inflation is a good thing — even if it doesn’t add much money to people’s bank accounts.

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