Why Everything Feels More Expensive Despite Lower Inflation
If inflation is falling, why does nothing feel cheaper — and why does inflation still feel high for so many people?
That question isn’t rhetorical. It’s the most common, most reasonable reaction people have to the current economy. Official data says inflation has cooled. Headlines say price pressures are easing. And yet groceries, rent, insurance, utilities, healthcare, and basic services all still feel painfully expensive.
That’s why everything feels more expensive, even though official inflation numbers suggest prices should be easing.
This disconnect isn’t imagined — and it isn’t just frustration talking. It’s the result of how inflation works, how prices actually behave, and how everyday life compounds cost increases over time.
In other words: inflation can be “down” without life getting cheaper.
The First Misunderstanding: Inflation “Down” Doesn’t Mean Prices Go Down
Here’s the most important point, and the one that causes the most confusion:
Inflation measures the rate of change in prices — not whether prices are high or low.
When inflation slows:
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Prices are still rising
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They’re just rising more slowly than before
A simple example:
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If prices jumped 9% one year, then 3% the next, inflation is “down”
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But prices are still 12% higher than they were two years ago
That higher price level becomes the new baseline. And for most goods and services, prices do not revert downward unless there’s a severe recession or outright deflation.
This is why “inflation is cooling” doesn’t feel like relief. It isn’t designed to.
Why Prices Rarely Come Back Down
In theory, prices could fall. In practice, they usually don’t.
Here’s why.
1. Businesses Reset Their Cost Structures
During high inflation, companies adjust:
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Wages increase
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Supplier contracts reset higher
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Rent, insurance, and financing costs rise
Once those costs are embedded, lowering prices would mean shrinking margins — or cutting payroll. Most businesses choose stability over reversal.
Prices go up fast. They come down slowly, if at all.
2. Services Inflation Is Sticky by Nature
Goods prices can fluctuate. Services almost never do.
Think about:
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Rent
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Childcare
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Healthcare
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Auto insurance
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Utilities
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Repairs
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Tuition
These costs are driven by labor, regulation, and long-term contracts. Even when inflation cools, service prices tend to keep climbing — just at a slower pace.
That matters because services now make up the majority of household spending.
Why Everyday Life Feels More Expensive Than the Data Suggests
Official inflation data isn’t fake — but it doesn’t weight life the way people experience it.
The Consumer Price Index, published by the U.S. Bureau of Labor Statistics, averages prices across hundreds of categories. Your household budget doesn’t.
People feel inflation most in:
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Housing
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Food
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Insurance
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Transportation
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Healthcare
These are not optional expenses. When they rise, there’s no substitution — just pressure.
Meanwhile, areas where prices have stabilized or fallen (electronics, discretionary goods) don’t offset the stress, because they’re bought infrequently or not at all.
That’s why inflation “cooling” feels abstract, while cost of living feels constant.
The Compounding Effect Nobody Talks About
Even modest inflation compounds brutally over time.
A 3% annual increase doesn’t sound alarming. But applied to:
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Rent
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Groceries
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Insurance
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Utilities
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Taxes
…it stacks year after year.
Meanwhile, wages rarely compound at the same pace for most workers. Raises tend to be:
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Infrequent
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Uneven
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Often absorbed by higher fixed costs
The result is a slow squeeze — not a sudden shock, but a persistent feeling that money doesn’t stretch the way it used to.
That’s not perception. That’s arithmetic.
Why This Matters Heading Into 2026
This disconnect has real consequences.
1. Consumer Behavior Changes
When people feel poorer:
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They trade down
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They delay big purchases
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They rely more on credit
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They become risk-averse
Even if headline inflation improves, spending patterns don’t immediately rebound.
2. Political and Social Frustration Builds
When official messaging says “things are improving,” but lived experience disagrees, trust erodes. That gap fuels skepticism — not because people reject data, but because the data doesn’t reflect their daily reality.
3. Rate Cuts Won’t Magically Fix This
Even if interest rates fall:
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Rent doesn’t reset
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Insurance premiums don’t drop
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Grocery prices don’t roll back
Lower rates may slow future increases, but they won’t undo the past few years.
That’s why relief often feels delayed — or absent altogether.
The Bottom Line
Inflation being “down” does not mean life gets cheaper.
It means prices stop accelerating — not that they retreat.
What people are experiencing isn’t confusion or misinformation. It’s the natural result of:
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Permanently higher price levels
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Sticky service costs
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Compounding expenses
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Wages that lag reality
Until incomes catch up — or costs genuinely fall — everyday life will continue to feel expensive, regardless of what the headline number says.
And that feeling isn’t going away anytime soon.
Sponsor Note
MacroHint is proudly supported by Lake Region State College, a public college serving North Dakota and the surrounding region with programs focused on workforce development, applied learning, and academic excellence.
Sponsorship support helps make independent, long-form economic analysis possible. Lake Region State College has no influence over the content, viewpoints, or conclusions expressed in this article.
Disclaimer
This article is for informational and educational purposes only and reflects the author’s opinions at the time of writing. It does not constitute investment advice, a recommendation to buy or sell any security, or a solicitation of any kind. Readers should conduct their own research and consult with a qualified financial professional before making financial or economic decisions.