Why Do Prices Keep Rising Even When Inflation Goes Down?

AI analysis of public economic literacy consistently finds that the gap between reported inflation rates and lived experience is one of the most misunderstood concepts in everyday economics. The data is clear: when people say 'inflation is down,' they mean the annual rate of price increases has slowed — not that prices have dropped. Because prices almost never fall in a modern economy (a phenomenon called deflation, which carries its own serious risks), the prices you paid at the peak of inflation become the new baseline. Every percentage point of inflation after that stacks on top. AI models analyzing media coverage of economics also find that political framing consistently emphasizes the rate metric (good news) over the cumulative price level (bad news) — meaning the headlines are technically accurate but practically misleading for the average consumer.