Inflation has continued to cool at the start of 2024, albeit in fits and starts.

The headline consumer price index for January rose 3.1% year over year. That’s the second-lowest annual rate since inflation shot up to nearly 9% back in June 2022.

Consumers now anticipate less inflation going forward, according to the University of Michigan consumer sentiment survey, which has buoyed their mood somewhat, though consumers remain relatively bummed out by historical standards.

One key reason is that prices remain really high, even as inflation — the rate of price increases — continues to come down.

Restaurateur Judd Harris knows prices.

At the two Little Griddle breakfast-and-lunch joints he co-owns in Portland, Oregon, he’s constantly monitoring what he has to spend for food and kitchen supplies and how much he can charge for items on the menu.

“As far as pricing goes, it’s been a bit of a roller coaster,” Harris said. “Everything changes, the market price of things like eggs and bacon and stuff. Recently it has been very extreme. We used to pay $11 a case for eggs. And it’ll go up to $75, $80, it’ll go back down to $24, it’ll go up to $90 — just all over the place. And I can’t change my menu pricing every week. So you just sort of say, ‘This week we’re not really going to make any money.’”

At the grocery store, bacon now averages around $6.60 per pound, according to the most recent data on consumer prices from the Bureau of Labor Statistics. That’s a 20% price increase since the pandemic hit; the price was $5.50 per pound in February 2020. Whole milk is up 27% to 4.08 per gallon. Eggs — which have also been affected by avian flu and supply shortages — now average $2.52 per dozen (grade A large), up more than 70%.

Harris said his restaurants’ menu prices are up 20 to 50 percent over the same period.

And even though Harris said he’s seen price increases moderate lately, he still gets sticker shock when he shops for himself as a consumer. “We’re getting smoked out here. My personal finances, I mean, we do OK. But it’s hard to go to the grocery store and be like, ‘Wow, is it really going to be $100 for these groceries that would have been so much less?’”

This difference — between how consumers experience inflation and how they experience high prices — is one of the things economist Ulrike Malmendier researches at the University of California, Berkeley.

“Consumer expectation will adjust to see that the rate of price changes will be slower,” Malmendier said. “That doesn’t mean that consumers are not still wrestling with the high price levels.”

This wrestling match is evident in consumer sentiment surveys.

Nearly 40% of consumers tell survey takers that high prices are currently eroding their standard of living — a figure that has barely budged since inflation shot up in 2022, said Joanne Hsu, director of the University of Michigan Surveys of Consumers. “Even though consumers have noticed inflation has slowed,” said Hsu, “they have also noticed that the impact of those prices on their living standards is still pretty painful.”

This is even more painful because we tend to have an idealized notion of how low prices used to be, especially back when we were first forming our impressions of normative prices.

This is a “well-documented psychological phenomenon: We remember the past being rosier, easier and cheaper than it was,” said the University of Chicago’s Ayelet Fishbach, a professor of behavioral science and marketing.

We’re nostalgic by nature, Fishbach said. Also, we’re not very good at calculating how prices and wages have gone up over time.

“The math is easier if you just look at the numbers and don’t compare it to your buying power,” she said. “You remember the burger costing $1, and now it’s $5. Specifically, we remember the low prices, we don’t remember how much less money we made.”

But — if our buying power has not kept up with inflation, it’s harder to adjust to the high prices we’re now paying, said UC Berkeley economist Ulrike Malmendier. “Price changes in goods and services have to be in line with the changes in wages for people to be able to afford their monthly bills. So the big question in terms of how much consumers will be scarred is: Did their wages adjust to these increased price levels?”

And there is plenty of scarring in the current moment because wages didn’t keep up through most of the recent bout of sharply higher inflation.

For more than two years, the consumer price index rose significantly faster than average hourly earnings. Wages started to outpace prices only about nine months ago, in May.

“For many consumers, the world is not back to normal, back to pre-inflation,” Malmendier said. “Because with their current income, they’re not able to afford the consumption they were able to afford before that spike.”

It’s one reason that, even as inflation fades, high prices are likely to keep annoying consumers — every time they get groceries, or shop for a car, or pay the rent.