Prices actually dipped a little last month. The question now is how much weaker inflation needs to get before the Fed gives us relief on interest rates . . . and how fast that relief will come. Luckily the math is a lot simpler than a lot of people think.

We learned today that the Fed’s preferred price index did indeed dip fractionally in November, leaving year-over-year inflation at a surprisingly mild 2.6%.

That’s a full 0.7 percentage point lower than it was in August, the last time the Fed raised interest rates before tacitly acknowledging that it was time to pause.

So if current nominal rates are just high enough here, they need to come down 0.7 point to match the progress we’ve seen on inflation. That’s not hypothetical either. It’s just how Jay Powell thinks.

Remember, they see inflation as something like the inverse of interest rates. The higher rates get, the slower money moves . . . think of it as a braking or cooling effect.

The higher inflation gets, the faster and hotter money moves. Because the Fed wants to lower the overall inflation rate, they need to keep interest rates higher than inflation . . . creating more of a net cooling effect to counter the heat.

In August, the “cooling” side weighed in at 5.33% and inflation remained robust at 3.3%, leaving roughly a 2-point spread between them. Adding a 2-point spread to the current inflation rate yields an effective interest rate of 4.6% in order to make everything line up.

That means the equivalent of three rate cuts just to keep up with the progress the economy has made in the last few months. From there, if inflation recedes any more, rates will need to drop along with it for things to balance in real terms.

The Fed wants to get inflation down to 2% before declaring victory. That might mean another 0.6 point of relief on the horizon . . . which is roughly what Wall Street expects to see before the end of next year.

Will overnight rates dropping to 4% feel good? Only people completely spoiled by a decade of zero rates will complain.

After all, we know companies can survive these rates. And while the first rate cut probably won’t be immediate, I’m reminded of a basic bit of advice: you can survive almost anything as long as you know it isn’t forever.

Wall Street currently thinks the cuts start in March. That’s only three months away. From that point, monetary conditions get easier in nominal terms. They stop getting harder.

I think companies can make it another 3 months. And in that scenario, the mood is going to get significantly brighter as the year goes on.