Cooling inflation will likely mean a reduction in the cost-of-living adjustment Social Security recipients could receive next year.

Overall inflation in June 2023 was up 3% from the previous year, according to the U.S. Bureau of Labor Statistics. That represents the smallest 12-month increase since the period ending March 2021.

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The Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, the index that’s used to determine COLA was up 2.6% year-over-year. However, the average monthly inflation rate was up slightly, keeping the COLA estimate at 3% based on July price data, according to the non-partisan advocacy group The Senior Citizens League.

A 3% COLA would raise the average monthly benefit of $1,789 by $53.70.

If it holds, the 3% COLA would be significantly lower than the 8.7% COLA increase Social Security recipients received in 2023.

The July CPI data is particularly important because the COLA is based on inflation during the third quarter – July, August and September. Inflation for those three months is added together and averaged, TSCL explains, then compared with the third quarter average from one year ago. The percentage difference between the two is the amount of the COLA, payable for the check received in January 2024.

The official COLA announcement is expected Oct. 12.