There's good news and bad news in Tuesday's inflation report.

• The bad news: Consumer prices have risen by a shocking 8.5% over the past year, a rate of increase not seen in more than 40 years.
• The good news: That number has probably gotten as high as it's going to get, and could soon start coming down.

What they're saying: Inflation "has likely peaked," said Bank of America analysts on Tuesday. Their counterparts at Capital Economics concurred, saying that the 8.5% figure would "mark the peak" for the series.

How it works: The headline inflation figure, which spiked by 1.2% in March alone, has been driven overwhelmingly by energy prices. Core inflation, which excludes food and energy, was relatively subdued, rising only 0.3%.

• Good news is likely in the coming April inflation report: The price of oil has fallen to $94 a barrel, down from a peak of $124 on March 8.
• Gas prices have followed oil prices down. The U.S. average price of $4.08 is down 6% from $4.34 in early March, per GasBuddy.

Be smart: Base effects matter a lot when looking at year-over-year inflation numbers.

• Right now we're reaching the end of the period in which we're comparing to prices that were artificially depressed by the pandemic — and we'll soon be comparing to prices that were hitting artificial highs thanks to global supply constraints.

The other side: Any declaration that inflation has peaked is necessarily "provisional at best," wrote RSM's Joe Brusuelas in a research note, given the volatility and unpredictability of oil prices in a time of war.

• If Europe stops importing oil and natural gas from Russia for any reason, that alone could send energy prices soaring again.

What's next: The Fed is going to keep on raising rates all year. The central bank tries to ignore volatile food and energy prices, but core inflation, at 6.7%, is well above the Fed's 2% target.

• Higher interest rates have already started to show up in the mortgage market, where 5% mortgages are now common. That should help slow home-price inflation.

The bottom line: We may be moving from inflation being high and rising, to inflation being high and falling. That's better, but it's still not great.