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Economists Agree: Inflation is Moderating

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  Published in Business and Finance on Wednesday, January 28th 2026 at 5:49 GMT by Fox News
      Locales: UNITED STATES, UNITED KINGDOM, JAPAN

Wednesday, January 28th, 2026 - In a field often characterized by diverging opinions and complex models, economists are finding rare common ground: inflation is, undeniably, moderating. While the reasons behind this shift and the future trajectory remain hotly debated, the fact itself is largely uncontested - a significant development considering the economic turbulence of recent years.

For much of 2022 and the first half of 2023, soaring inflation rates dominated headlines and fueled anxieties about a potential economic crisis. Now, as we begin 2026, the data paints a different picture. Key indicators consistently show a slowing down of price increases, though levels remain above pre-pandemic norms. This easing is allowing for a cautious optimism, while simultaneously highlighting the intricate challenges of navigating the current economic landscape.

"Everyone knows that inflation is moderating," stated Diane Swonk, chief economist at Morgan Stanley, in a recent interview. This sentiment is echoed across the economic spectrum, from Wall Street analysts to former government officials. Even Larry Summers, former Treasury Secretary known for his often-prescient economic warnings, acknowledged the consensus, stating on Bloomberg Television, "It's remarkable how much consensus there is that inflation is moderating...It's also remarkable how much there is disagreement on what the next few quarters will bring."

But what is driving this moderation? Economists offer various explanations. A frequently cited factor is the gradual resolution of supply chain disruptions that plagued the global economy following the COVID-19 pandemic. Lockdowns, port congestion, and material shortages pushed up costs for businesses, which were subsequently passed on to consumers. As these logistical bottlenecks ease, the upward pressure on prices has begun to subside.

However, attributing the slowdown solely to supply chain improvements is an oversimplification. The aggressive monetary policy pursued by the Federal Reserve over the past two years plays a crucial role. Through a series of substantial interest rate hikes, the Fed aimed to curb demand and cool down the overheated economy. These higher rates make borrowing more expensive for businesses and consumers, theoretically reducing spending and dampening inflationary pressures.

The impact of these rate hikes is now becoming increasingly visible, though the full extent is still unfolding. The question on everyone's mind is whether the Fed can engineer a "soft landing" - a scenario where inflation returns to the target range without triggering a significant recession. This is proving to be a delicate balancing act.

The possibility of a recession remains a significant concern. Some economists believe that the cumulative effect of higher interest rates will inevitably tip the economy into a downturn, particularly as businesses and consumers grapple with increased borrowing costs. Others maintain that the labor market remains resilient, and consumer spending, while moderating, is still relatively strong, offering hope for a soft landing. The latest jobs reports, while showing some cooling, continue to demonstrate a surprisingly robust level of employment.

Beyond the immediate factors driving inflation, longer-term trends are also at play. The shift in global economic power, the ongoing geopolitical tensions, and the increasing adoption of automation all contribute to the complex interplay of forces shaping the economic outlook. Furthermore, the impact of fiscal policy - government spending and taxation - cannot be ignored. Significant government investment in areas like infrastructure and green energy could provide a boost to economic growth, but also potentially add to inflationary pressures.

The rare consensus on moderating inflation is a testament to the power of data-driven economic analysis. It demonstrates that, despite their disagreements on other issues, economists can collectively identify and acknowledge fundamental shifts in the economic landscape. However, as Larry Summers pointed out, agreement on the direction doesn't equate to certainty about the future. The path ahead remains uncertain, and careful monitoring of economic indicators will be crucial in navigating the challenges and opportunities that lie ahead.