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From the opinion pages of the Wall Street Journal, this is Potomac Watch.

The latest inflation report shows consumer prices up 7.1% year over year as the one-time cryptocurrency king Sam Bankman freed is arrested in the Bahamas.

Welcome, I'm Kyle Peterson with the Wall Street Journal.

We are joined today by my colleagues, columnist Joe Sternberg and Kim Strassel.

Welcome to you both.

The Labor Department on Tuesday released its newest inflation report. Prices are up 7.1% in November compared with one year ago.

Joe, one of the things that strikes me here is the framing effect of this.

It's true that that is down from 7.7% year over year in October and 9.1% in the peak of June.

And yet it is still amazing to see some of the news coverage saying inflation is down sharply to 7%.

And so you're an experienced Fed head with apologies to grateful dead fans. So what do you read into these numbers today?

Well, I think we're probably getting into what I would think of as the defining DV and C down phase of this inflationary cycle.

For precisely the reason that you just alluded to Kyle, 7.1% inflation is high.

I remember the Federal Reserve's target is 2%. So we are well above that 2% target.

And in fact, the inflation has been substantially above the Fed's target for about a year now, I think, if you were to go back and look at the data, perhaps rather more than that.

And yet we have this celebration that it is less abnormally high than it used to be, even though it's still very abnormally high.

A certain amount of that celebration, particularly among investors on Wall Street, is related to the fact that the Fed's method of fighting inflation this year has been to increase interest rates to engage in quantitative tightening to reduce its balance sheet.

That has all been very painful for investors. And so they are anxiously keeping their eyes open for any sign that the pain is going to let up soon.

And so I think we're coming to have this tendency to focus on inflation data that is still bad, but is at least better than it used to be.

And I mean, the fact that it's better than it used to be might be a sign that what the Fed has been doing over this course of this year is starting to have an effect that we're starting to see some moderating in the rate of increase in prices.

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