Inflation Sparks Skewed Memories of Lower Prices
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Here's your money briefing for Wednesday, March 15th. I'm J.R. Whelan for The Wall Street Journal. Don't let February's lower inflation rate of 6% fool you. Prices are still rising, just at a slower pace. A trip to the grocery store might cause consumers to compare today's high prices with what they remember were much lower prices just a couple of years ago. The problem is, their memory of those low prices isn't always accurate.
I think in some ways it plays with our sense of time. People are really used to the idea of prices rising pretty gradually. And so there's a real whiplash associated with seeing them rise so quickly.
We'll talk to Wall Street Journal reporter Joe Pinsker about so-called price nostalgia. Plus, we'll talk to the co-author of a forthcoming study on why the mind remembers prices being lower than they actually were. That's after the break.
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What is 'price nostalgia' and why is it being discussed now?
February's inflation reading came down a bit to 6%. That's little consolation for consumers who continue to pay more and more for things like groceries. And while it wasn't that long ago when inflation began its sharp climb, many of us have a cloudy memory of how much cheaper prices actually were. In a moment, we'll talk to a Georgetown University professor who's co-authoring a study on why we misremember prices. But first, let's bring in WSJ personal finance reporter Joe Pinsker. Hey, Joe, thank you for being with us.
Yeah, thank you for having me.
So, Joe, help us fill in the timeline for a moment. Even though we've seen the inflation rate come down in the past several months, what's been the trend going back to mid-pandemic?
Yeah, so if you look back at the last couple years, prices have, and this probably won't be news to people, been rising at much faster rates than people are accustomed to. In January, if you looked at the Consumer Price Index, that was up 6.4% from a year earlier, which is a slightly lower rate than the very high peak that it hit of 9.1% last summer in June 2022. So, yes, inflation has been slowing a bit, but this doesn't mean that prices are coming down. It just means that they're increasing a little bit less quickly than they were in pretty recent memory.
Wow. And so anybody who's currently shelling out double or triple the amount that they used to spend on, you know, for example, their weekly grocery run, they probably remember the good old days when things were a lot cheaper. But how has the passage of time, and in this case, not really a lot of time, played with people's memories?
Absolutely. I've been talking with consumers about how they feel about the emotional side of a price increase. And it's really interesting. I think in some ways it plays with our sense of time. People are really used to the idea of prices rising pretty gradually. And so there's a real whiplash associated with seeing them rise so quickly. I talked to one guy who watched the price of his avocados rise from $1 a piece to $2.50 over the course of a year.
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