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It's a complicated picture when you look at the latest inflation numbers

JUANA SUMMERS, HOST:

Inflation continues to impact daily life in the U.S., but there was a glimmer of good news today. Prices in December were up 6.5% from a year ago, and that's the lowest inflation we have seen in over a year. A sharp drop in gasoline prices last month helped to keep the overall cost of living in check, but inflation fighters at the Federal Reserve say it is too early to declare victory. NPR's Scott Horsley joins us now. Hi, Scott.

SCOTT HORSLEY, BYLINE: Good afternoon.

SUMMERS: So Scott, it sounds like inflation is coming down, but it is still higher than most people would like. What's going on here?

HORSLEY: Yeah, inflation is definitely coming down after hitting a four-decade high last summer. That is the good news you mentioned. The drop in gas prices is part of that. We've also seen a drop in the price of a lot of goods as snarled supply chains start to come untangled. For example, the price of new cars dropped last month for the first time in almost two years. Other prices, though, are still going up, including the price of a lot of services, like car repairs. They jumped almost 20% in the last year. So we're not finished with inflation. But speaking at the White House today, President Biden said we are moving in the right direction.

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PRESIDENT JOE BIDEN: The data's clear. Even though inflation is high in major economies around the world, it's coming down in America month after month, giving families some real breathing room.

HORSLEY: Now, one place you still see inflation is at the supermarket. Everybody's got to eat. And grocery prices are up nearly 12% this year - this past year. Egg prices are up almost 60%, largely as a result of the avian flu, which wiped out a lot of laying hens. But, you know, supermarket inflation last month was the lowest it's been in nearly two years. And some forecasters think we're going to start to see outright declines in food prices in the not-too-distant future.

SUMMERS: OK, that sounds like some good news. So does this mean that the Federal Reserve can just relax and stop raising interest rates?

HORSLEY: Not just yet. While inflation has come down, it's still well above the Fed's target of 2%. And Mary Daly, who heads the San Francisco Federal Reserve Bank, told The Wall Street Journal this week it's just too soon to let up on the brakes.

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MARY DALY: We want to return the economy to a place where Americans, businesses, consumers, communities - they don't have to think about inflation every day. When I'm out there in the community, that's the No. 1 topic on people's mind.

HORSLEY: Investors overwhelmingly expect the Central Bank to raise its benchmark interest rate by a quarter percentage point at its next meeting in a few weeks. That would be the smallest rate hike, though, since last March. The Fed's already raised rates pretty aggressively so far, and it hasn't really hurt the job market yet. That has some analysts thinking the Fed might succeed in getting prices under control without a big jump in unemployment. The stock market liked what it saw in the inflation report today. The Dow jumped more than 200 points.

SUMMERS: And other countries are also wrestling with high inflation. How is that affecting the global economy?

HORSLEY: This week the World Bank slashed its forecast for economic growth both here in the U.S. and around the world. Treasury Secretary Janet Yellen told NPR today that while the U.S. is making what she called substantial progress in fighting inflation, she is concerned about a slowdown in the global economy. Yellen says the best way to combat that would be to end Russia's invasion of Ukraine.

JANET YELLEN: That invasion and the brutality and the economic spillovers from it are a very important factor that is responsible for diminished global growth at a time when we're just beginning to recover from the pandemic.

HORSLEY: Yellen says the combination of slow growth and high interest rates could be a real double-whammy for debt-ridden developing countries.

SUMMERS: NPR's Scott Horsley. Scott, thank you.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.