Inflation in the Bay Area finally started cooling at the end of 2022, although year-over-year increases in living costs remain far higher than is typical, a government report released Thursday shows.

The Bay Area inflation rate in December was 4.9% as measured over a one-year period, the U.S. Bureau of Labor Statistics reported, down from 6 percent in the previous report in October.

Nationwide, consumer prices rose 6.5% during the 12 months ending in December, which was also a decline from the national inflation rate in recent months.

The news was even better in the shorter term: In the two most recent months that are part of the report, Bay Area consumer prices actually fell by 0.3%, offering some hope that the region is turning a corner.

“For both consumers and businesses, inflation is having a very great impact,” said Patrick Kallerman, vice president of research for the Bay Area Council Economic Institute. “This slow cooling in consumer prices is what we were hoping for.”

Still, the Bay Area’s 4.9% increase in consumer prices remains far above the typical annual increase of about 2% to 3%, and it’s enough to cause pain for a lot of the region’s residents.

“Inflation hurts anybody whose income hasn’t kept up with the increase in prices, which is the case with most people,” said Stephen Levy, director of the Palo Alto-based Center for Continuing Study of the California Economy. “Inflation hurts even more if you have no savings to fall back on.”

Several categories helped to fuel December’s jump in Bay Area consumer prices. Among the biggest increases in annual prices, as reported by the labor agency:

• Electricity utility costs soared by 18.4%. Pacific Gas & Electric is the principal provider of electricity services in the Bay Area.
• Dairy products rocketed 17.4% higher.
• Natural gas was up 14.7%. PG&E has warned that gas utility costs could zoom still higher this winter due to spikes in market prices for natural gas.
• Food is costing 10.2% more on a yearly basis.
• Meat, poultry, fish and eggs cost 7.6% more than they did the year before. Anyone who has been to the grocery store recently knows that eggs, on their own, have zoomed far higher.
• Cereals and bakery items prices are up 6.3% on an annual basis.
• Household furnishings and supplies are up 4.9%

The 6.5% inflation rate for the United States is at least twice as high as the target that the Federal Reserve has set for consumer price increases as it seeks to maintain healthy growth. But it was also the slowest increase since October 2021, a pullback driven by falling gas prices and cheaper airfares.

President Biden greeted the report enthusiastically, emphasizing the role that his policies — including efforts to lower the cost of gas — have played in helping prices to climb more slowly. In remarks from the White House on Thursday, the president said that moderating inflation “adds up to a real break for consumers, real breathing room for families and more proof that my economic plan is working.”

The Fed, alarmed by the prospect of runaway inflation, has embarked on an odyssey to raise interest rates in hopes that the increases will prompt consumers to scale back borrowing and spending, creating downward pressure on prices.

“All of these rising consumer prices filter into the economy in various ways,” Kallerman said. “At some point you usually see wages respond because workers are seeking more money to spend. This creates a vicious cycle that the Fed is working hard to interrupt.”

But the central bank’s voyage toward higher interest rates could also cause businesses to cut back. Already, the Bay Area has seen multiple announcements of layoffs from major employers and tech giants.

“We’ll see a continued deceleration in job gains,” Levy said. “I wouldn’t be surprised if the Bay Area goes negative and we see job losses, with all the tech layoffs that are happening now.”

A few key items provided some relief for consumers in the region.

Gasoline prices as measured by unleaded fuel fell 5.3% in December compared with the same month the year before, according to the government report.

Costs for used cars and trucks fell by 7.5% during the one-year period that ended in December.

Some experts believe that it’s possible the Federal Reserve could navigate the nation away from soaring consumer prices but still avoid steering into a whirlpool of job losses.

“We see some movement towards layoffs, but there is nothing catastrophic yet in the job market,” Kallerman said. “This slow cooldown is the kind of landing the Fed is seeking.”