The figures insist: inflation is all but defeated. The shopping cart says the opposite. This unease is no illusion; it is a confusion between two different things: the speed at which prices rise, and the level they have reached. The first has slowed. The second will not come back down. And in the interval, some have suffered inflation less than they have made use of it.
1 The founding confusion
It all begins with a confusion of vocabulary.
The flow and the stock
Two things called by the same name
The inflation rate is a flow: the speed at which prices rise, in percent per year. The price level is a stock: the price of the basket, where it has arrived after years of increase. When we say "inflation is falling," we mean the flow is slowing, not the stock receding. The Federal Reserve Bank of St. Louis made it the title of a note: "the rate of inflation is falling, but prices are not."
Three words not to confuse
①
Inflation. Prices rise (a positive rate). A basket at 10 becomes 10.40 with 4% inflation.
②
Disinflation. The rate falls, but stays positive: prices still rise, just more slowly. The basket goes from 10.40 to 10.70, not back to 10. We slow without receding.
③
Deflation. The rate turns negative: then, at last, prices fall. The basket comes back down. It is the only case where the stock recedes, and it is precisely the one we dread.
2 The wall of the level
For the stock has made a leap that does not erase.
The accumulated
What households really feel
In the United States, the rate came back to around 2 to 3% in 2024-2025, after a peak of 9.1% in 2022. But the cumulative level remains: prices are roughly 25% higher than in 2020, more than double the increase of the previous five years. In the euro area, food climbed about 33% in a decade. Households do not feel the rate, which has slowed; they feel the level, which remains. Hence the gap between the discourse and the receipt.
US prices since 2020
+25%
the cumulative level, despite the rate's return near 2% (BLS).
Food, euro area
+33%
over a decade (Eurostat).
The memory of prices
The mind does not retain a rate of change, it retains a reference price: the one we were used to. When the baguette, the coffee or the full tank shifted to a new tier, the memory of the old price sustains a lasting sense of inflation, even when the statistic announces the lull. Surveys confirm it: in 2024, households perceived food inflation of around 6% when it was measured at 2%.
3 Why it will not fall
And above all, one must not wish for it.
The cure worse than the disease
Bringing prices down would demand a recession
For the price level to recede, it would take a deflation, that is, a durably negative rate. Yet central banks above all do not aim for it: they target 2%, not zero. An entrenched deflation sets off a spiral: if prices fall, you postpone your purchases waiting for them to fall further, demand drops, profits and employment with it, and prices fall again. The economist Irving Fisher showed as early as 1933 that falling prices increase the real weight of debts: each euro owed becomes heavier to repay.
Great Depression
−24%
in the price level between 1929 and 1933, unemployment at 25%.
Central banks' target
2%
not zero: a cushion against deflation.
The only realistic way out
Japan endured decades of flat prices and stifled growth for having let deflation take hold. The lesson is harsh but clear: prices will not be brought back down without breaking the economy. The only acceptable way out, then, is not for prices to rejoin wages, but for wages to rejoin prices. Catch-up, not return.
4 Rockets and feathers
All the more so since prices adjust poorly downward.
The asymmetry
They rise like rockets, fall like feathers
The image comes from the economist Robert Bacon, in 1991, on fuels: when oil climbs, the pump price follows at once; when oil recedes, the fall is slow to come, partial and delayed. This asymmetry rests on several drivers: menu costs, market power, the fact that consumers search less for bargains when prices rise than the reverse. It is firmly established for gasoline; its generalization to all goods remains debated.
The lock on wages
Nominal wages, too, resist falling: an employer would rather freeze a salary than cut it, and employees refuse any cut. It is even an argument for mild inflation: with prices rising 2%, a stagnant wage gently loses purchasing power without anyone having to announce the slightest reduction. Downward rigidity is thus everywhere: in prices as in pay slips.
5 Greedflation
But not everyone merely suffered the rise.
Profit-led inflation
When margins profit from the disorder
The economist Isabella Weber advanced a thesis first mocked, then taken up: part of recent inflation would be a "sellers' inflation," firms having seized on the cost shock and the ambient confusion to raise their prices beyond their own increases, widening their margins. The figures eventually gave it weight: the European Central Bank estimated that unit profits explained nearly 60% of the rise in domestic prices in 2022-2023, the International Monetary Fund about 45% of European inflation. In the United States, corporate margins hit their highest since 1950.
Profits in inflation (euro area)
≈ 60%
of the 2022-2023 deflator rise, "normal" share 42% (ECB).
US corporate margins
1950
highest level since that year (in Q2 2022).
The right word, cautiously
"Greedflation" is an accusing word, and it must be handled with care: we shall see in the final chapter that the thesis is contested. But the fact itself is measured: on this wave, margins did not absorb the cost shock, they sometimes outran it. Inflation was not only a shared misfortune; for some, it was an opportunity.
6 The perfect excuse
And media-amplified inflation offered an ideal cover.
Excuseflation
"A little bit of inflation is always good in our business"
When inflation makes the headlines, raising your prices no longer shocks: everyone is raising, the customer expects it, and the increase passes unnoticed in the din. Economists have named this "excuseflation." Its trace is found in the very words of executives, on earnings calls. The head of the Kroger chain: "a little bit of inflation is always good in our business." AutoZone's: "after periods of high inflation, our sector has historically not lowered its prices." Others have boasted, before their shareholders, of their "pricing power."
Said out loud
What strikes is not that companies raise their prices, that is their trade. It is that they own it before the markets as good news, at the very moment public discourse spoke of shared sacrifice. Inflation, presented to customers as a fate, was presented to investors as a windfall.
7 The shameful shrinking
And when one dare not raise, one hides.
The masked increase
Less in the package, the same on the label
Shrinkflation consists of reducing the quantity at the same price: the price per kilo climbs, but the displayed price does not move, and the consumer, who looks at the label and not the contents, notices nothing. Its cousin, skimpflation, lowers quality rather than quantity: a stingier recipe, a cheaper ingredient, a reduced service. Remarkably, shrinkflation's effect on measured inflation is minuscule: American statisticians put it at a few hundredths of a point. The harm is not in the figure. It is in the method.
Effect on US inflation
≈ 0.06 pt
of the 2019-2024 price rise (GAO): negligible.
Concerned consumers
82%
in the United States say they are worried about shrinkflation (YouGov).
The law steps in
Because the practice erodes trust, lawmakers have taken it seriously. In France, since July 2024, large retailers must flag on the shelf the products whose quantity has dropped while the price climbed; Carrefour had pre-empted the law as early as 2023. In the United States, the president took it up as far as a video aired on Super Bowl night, denouncing a "rip-off." A sign that the issue is not an accounting one, but a moral one.
8 The moral asymmetry
For at bottom, it is not the rise we resent, it is the ruse.
The fairness of a price
Raise it plainly, or deceive
The psychologist Daniel Kahneman showed that we judge a price not by supply and demand, but by a norm of fairness. A rise justified by higher costs is accepted; exploiting a shortage to raise prices is judged unfair. His famous example: a store that raises the snow shovel from 15 to 20 the morning after a storm is judged unfair by 82% of people. The same logic holds for the masked increase: quietly reducing a package violates the norm of transparency even more than an owned-up rise.
The verdict of the studies
A 2024 study confirms it: consumers judge shrinkflation more unfair than an equivalent price rise, precisely because they perceive it as deception. But here is the most instructive part: this aversion disappears as soon as the change is clearly disclosed. In other words, it is not the increase that outrages, it is the concealing of it. An honest rise is forgiven; a ruse, never.
9 What catches up
It remains to do justice to the nuance, and to conclude.
The balance
Greed does not explain everything
Let us be rigorous: the profit-led inflation thesis is contested. Ben Bernanke and Olivier Blanchard, in a landmark study, attribute most of the wave to supply shocks, energy, food, supply chains, for two thirds to three quarters. The Federal Reserve notes that margins, once adjusted for public aid and the fall in rates, had largely returned to normal by late 2022. And as the economist Jason Furman sums it up, "blaming inflation on greed is like blaming a plane crash on gravity": technically true, but beside the point. Greed is a constant; it is competition that bounds prices.
The compass
①
Tell the flow from the stock. "Inflation is falling" and "prices are falling" do not mean the same thing. The first is true, the second is not, and the unease comes from there.
②
Hope for catch-up, not return. Real relief comes from wages rejoining prices (in the United States since mid-2023, in Europe since 2024) and from a few genuine declines, energy, electronics, used cars, not from an improbable general retreat.
③
Demand transparency. Against opportunism, the best defense is not indignation but clarity: a disclosed rise can be discussed, a masked one is simply endured.
What prices keep in memory
The cost of living has brought down incumbents: since 2020, roughly three out of four governments in Western democracies have been defeated, often in economies judged sound. The paradox of angry voters amid solid growth fits in one sentence: people vote on the price level, not on the inflation rate. Inflation, for its part, will end up fading from the statistics. Prices remain: it is their honesty, or their opportunism, that is remembered the longest.
Read alongside: When your data sets your price, the other face of pricing power. Reference: abbreviations & acronyms used (CPI, ECB, IMF, BLS).