From CNBC:

Inflation in the U.S. economy is on the retreat, with the consumer price index falling gradually to 3.4% in December 2023, close to the 2% target. But the final disinflationary hurdle will be challenging without curtailing economic growth, due to persistent inflation among services which account for 59% of the CPI.

The difficulty with reducing inflation is largely centered on the “services” side of the economy, as opposed to goods, which have seen less significant changes in inflation. Further broad disinflation likely won’t come from consumer goods, which means services inflation needs to moderate. The persistent inflation in services, and particularly in housing, is dragging down the general inflation rate.

The theory that the last mile of disinflation will be harder than what came before is a point of contention among economists. While some argue that it will be a challenge, others believe the inflation battle is already nearly won. The Federal Reserve’s preferred inflation gauge, the PCE index, was running at a 1.9% six-month annualized rate, already below the 2% target. So, not everyone is convinced that the battle against inflation will be as difficult as predicted.



Read more: Why that ‘last mile’ of the inflation fight may be more challenging