Stimulus Update: No Checks in Sight, but at Least There's Some Relief From Inflation

A big reason Americans have been calling for stimulus checks over the past year is that they've needed relief from inflation. Since mid-2021, living costs have been climbing, and in recent months, they've been elevated to a notable degree. That's caused many people to have to raid their savings and rack up costly debt on credit cards just to stay afloat.

Now the bad news is that we don't seem to be anywhere close to seeing another stimulus round hit Americans' bank accounts. In March, the unemployment rate was 3.5%. That's comparable to where the jobless rate sat prior to the pandemic, and it's by no means a high enough rate to warrant a stimulus round.

The good news, though, is that inflation finally seems to be easing. And if that continues, those who are struggling to pay their bills today may find that it's easier to keep up with their expenses as 2023 chugs along.

Living costs are finally dropping

In June of 2022, the Consumer Price Index (CPI), which measures changes in the cost of consumer goods, was up 9.1% on an annual basis. By contrast, in March, the CPI was only up 5%.

Now that's still a fairly high level of inflation, as 2% is generally considered a moderate, acceptable amount. But still, 5% is worlds better than 9%.

It's also worth noting that inflation has been steadily dropping since peaking last June. And if that trend continues, U.S. consumers might face fewer struggles in the coming months, even if they aren't privy to stimulus checks.

Of course, it's worth noting that while inflation has eased, prices are still up compared to "normal" levels. The cost of groceries, for example, was up 8.4% on an annual level in March. And the cost of food away from home (such as restaurant meals) was up 8.8%.

On the other hand, some living costs were down on an annual basis in March. The cost of gas dropped 17.4% from a year prior. And used car prices were down 11.2%. Other costs, like medical care services, held relatively steady, rising at just 1% annually.

When will we get back to 2% inflation?

We're still pretty far away from 2% inflation. And we may not get back to that point this year. But if inflation levels continue to drop, consumers should get a nice amount of relief during the second half of 2023.

Now last year, many states opted to issue stimulus checks to residents to help them cope with inflation. It'll be interesting to see if that happens again later on this year, since we're in a much better place as far as inflation is concerned. But even if state aid doesn't become available, a gradual drop in living costs should make a big difference in a lot of people's worlds.

Meanwhile, this recent drop in inflation might prompt the Federal Reserve to hit pause on the interest rate hikes it's been implementing since early 2022. Those hikes have already driven up the cost of borrowing, and they have the potential to really hurt consumers with variable-rate credit card balances.

But if the Fed slows down on rate hikes this year, consumers with existing credit card balances could get some relief as they aim to pay off their debt. The combination of that and lower living costs could make a huge difference.