Stimulus Update: Will Slowing Inflation Take Stimulus Aid Off the Table for 2023?

There's relief for consumers -- but only from sky-high prices.

Inflation was a major problem for consumers in 2022. In June of that year, the Consumer Price Index (CPI), which measures changes in the cost of consumer goods, rose 9.1% on an annual level.

But thankfully, the pace of inflation has slowed steadily since then. And in December of 2022, the CPI came in at just 6.5%. Now that's still a high reading on a historical basis, but it's considerably lower than 9.1%.

Now clearly, cooling inflation is a good thing. If it costs less for people to function and cover basic living costs, they're apt to start struggling less and racking up less credit card debt. But will easing inflation take stimulus checks off the table for 2023?

Inflation isn't all that relevant

It's a big misconception that inflation is what dictates whether stimulus checks hit Americans' bank accounts or not. Rather, stimulus aid hinges on the state of the economy -- namely, unemployment and consumer spending.

When jobless levels are high and consumer spending starts to decline, lawmakers can use stimulus checks as a way to pump money into the economy to give it a lift as needed. When unemployment levels are low and consumer spending holds steady, there's generally no need for stimulus checks -- why would there be?

That's why cooling inflation levels won't necessarily take stimulus aid off the table for 2023. But to be clear, inflation has little to do with stimulus checks, so whether it's high or low is almost irrelevant.

That said, the fact that inflation is easing is definitely good news for consumers. Case in point: An item purchased in 2020 for $40 would've cost more than $45 in 2022 based on inflation. That's a massive jump.

It's too soon to apply similar numbers to 2023 because, well, we've only just started off the year and we don't have fresh inflation data just yet. January's data, for example, won't come out until February. But either way, slowing inflation is a good thing. And anyone who's bummed out about not getting a stimulus check should realize that relief from soaring living costs might go a lot further than a one-time payday.

So are 2023 stimulus checks definitely a no?

Not necessarily. There's always the possibility of a recession -- something nobody wants. Financial experts have been warning of one for months, so we can't write off the idea of economic conditions worsening to a notable degree.

In that case, a stimulus check could come into play if jobless levels skyrocket. But that's obviously not something anyone should want.

That said, cooling inflation may be a sign that we're going to be able to avoid a recession. If the pace of inflation continues to slow, the Federal Reserve might pump the brakes on its aggressive interest rate hikes. That could make it so consumers aren't forced to slash their spending drastically. And if spending holds steady, we can probably avoid an economic slowdown.

So all told, easing inflation is very much a good thing -- even if it doesn't lead to a specific sum of money in individuals' bank accounts.