Are Prices Ever Going to Come Down? 5 Economists Weigh In

Officials like Federal Reserve Chair Kevin Warsh acknowledge that this is an “elevated” level. The Federal Reserve raised interest rates in September for the first time since 2023 (then held them steady last Wednesday). Warsh has insisted policymakers remain committed to long-run price stability, defined as 2% inflation — and not a bit higher.

“The first thing we did when we showed up, with my colleagues, is we doubled down on the 2% inflation target. We said, ‘We own it, we’re taking responsibility,'” he said at a news conference Wednesday. “If you think that we’re tolerating some inflation target somewhere in the 2’s, let us disabuse you of it.”

Normally, economists say, a small amount of inflation is ideal for an economy. But after the steep price increases households have been forced to absorb, many Americans are wondering whether there could be a period of deflation, when prices don’t just stop rising but actually fall, erasing some of those past gains.

In other words: Will ad-free Netflix ever cost under $15 a month again? Or will average home insurance premiums drop below $2,000 a year?

We reached out to five economists to ask for their inflation predictions.

Gregory Daco: Pre-2020 prices are probably never coming back

“Average prices as measured by CPI are up about 30% since 2019,” says Daco, chief economist at EY Parthenon. “Consumers shouldn’t expect prices to return to where they were before the inflation surge, as that would likely require a significant economic downturn and sustained deflation; inflation should cool over time, but that simply means prices rising more slowly, not falling.”

Ellen Meade: Disinflation is the real goal

“Prices coming down on average would be deflation. I do not expect deflation, nor should we want deflation. What we want is disinflation, which is a lower rate of inflation,” says Meade, a research professor of economics at Duke University.

“How much disinflation is possible depends on the outlook for supply shocks such as oil and tariffs, and how much inflation in the economy is related to demand pressures. Currently there is at least some inflation coming from demand (about 1 percentage point, if you trust the SF Fed breakdown), so the Fed’s monetary policy has scope to reduce inflation (bring about some disinflation) to some extent.”

Mark Zandi: Only a severe recession would lower prices

“Prices for certain goods and services may fall, such as gasoline, which is tied to highly volatile oil prices, but barring a severe recession, overall prices will not decline,” says Zandi, chief economist at Moody’s Analytics. “Falling prices, also known as deflation, are rare, as businesses’ labor and other costs are unlikely to decline.”

He adds: “Businesses won’t cut prices broadly unless they’re under severe distress, such as in a recession or depression, because doing so would wipe out their profits. What should improve is the pace of inflation. As it moderates and wages continue to grow faster than prices, the cost of living should become more affordable.”

Kathy Bostjancic: Some item prices may fall, but overall won’t

“The pace of inflation will slow over time and eventually get back to the Fed’s 2% target, which we forecast happening by the end of 2027. However, the overall level of prices is not going to decline, it would just be the rate of change slows,” says Bostjancic, chief economist at Nationwide.

“Overall price level declines would only pay out in an outright deflationary period, which outside of a deep recession are unusual. That said, we could see some areas where price levels could decline, but not on an overall basis.”

Gus Faucher: Deflation scenarios linked to higher unemployment

“The only way prices come down is through a recession,” says Faucher, chief economist at PNC. “To actually see deflation — falling prices — the U.S. would have to see a severe recession with a huge increase in the unemployment rate and enormous job losses. No one wants to see that.”

Faucher adds: “What the Federal Reserve wants to see is disinflation — prices going up more slowly. The economy can still grow, with prices increasing less. So no one should expect prices to go back to where they were before the pandemic, or even a few years ago.”