Every day, it seems, there is a warning about inflation, especially in the U.S. where consumer prices jumped 5.4% in July from the previous year and a full 0.9% increase from the month of June. Even if you take out volatile food and energy prices, “core” prices were up 4.3%, just slightly below the 4.5% reported for June, which was the biggest increase since November 1991.

To those familiar with “the decade of inflation” of the 1970s, rising prices are raising concerns that the U.S. economy is on track to repeat those dark days of double-digit price increases and crazy-high interest rates. Let’s take a closer look at what’s really going on today.

A small part of the economy is driving the inflation numbers.

Taken at face value, today’s inflation numbers can be alarming. Or at least that’s what we are hearing, reading, and seeing on business media outlets. But if we look more closely, we’ll quickly see the overall increase is driven by a few outliers. Energy prices, for example, were up 23.8% from the previous year (and up 1.6% from the previous month of June). Even so, energy fell well behind the increased costs of used cars, where prices were up 41.7% from the previous year and a staggering 10.7% since May. In practical terms, even though used car sales represent just 3.2% of the consumer price index, used car prices accounted for a third of the monthly increase between May and June in the overall index.

But even used car prices couldn’t keep up with the inflated price of renting a car, which now costs 73.5% more than a year ago. Believe it or not, this is an improvement from June, when the price of a rental was up a blistering 87.7%.

What happened? When the pandemic hit, people stopped traveling. And when people stopped traveling, rental car agencies stopped renting cars. And since they no longer needed their cars, they sold a huge share of their fleets.

In June, as people started to travel, they needed to rent cars. But the cars had been sold.

Inflation didn’t just hit Hertz, Avis, and others. Travelers also saw a big price increase in airline fares, up 24.6% from a year ago in June and 19% in July, and hotels, up 24.1% from last July.

Inflation in the larger economy is more modest.

We gain a better understanding of the economy—and inflation—if we trim the components experiencing both exceptionally high and exceptionally low rates of inflation. This study, performed by the Federal Reserve Bank of Cleveland, trims the one-month inflation rates of components falling below the 92nd percentile and above the 8th percentile of price changes. After removing the outliers of used cars, car rentals, major appliances, airline tickets, hotel stays, and a few others, the Cleveland Fed’s “16% trimmed mean Consumer Price Index” measured July’s inflation rate at 3.0% from the previous year, an increase of just 0.1% from June, suggesting that when a small number of categories are excluded, underlying inflation increased at a more modest level.

What does this mean? The areas experiencing a big surge in prices don’t reflect stimulus spending or wage pressures. Rather, as the pandemic started to lose its hold in June, consumers became more active. At the same time, supply chain constraints—which likely will be resolved over the next 12 to 18 months—in some sectors have also pushed prices higher.

As such, it seems premature to worry about the dire effects of inflation as there is good reason to expect the current pressure to lessen.

And for those who lived through the 1970s? You can put your “Whip Inflation Now” buttons back in the box.

You know what I’m talking about.

Paul Brown is the owner and founder of Clearstone Wealth Management LLC, a fee-only independent fiduciary company in Liberty Lake. He can be reached at paulb@clearstonewealthmanagement.com or through the Clearstone Wealth Management website at www.clearstonewealthmanagement.com.