That’s how many economic forecasters in a new survey predicted the inflation rate wouldn’t normalize until at least the second half of 2023, if not later.
The 48 professional forecasters surveyed by the National Association for Business Economics were asked when the so-called core inflation rate (which leaves out food and energy prices) might return to the 2% range that the Federal Reserve targets (and that was commonplace before the pandemic). Right now the rate—as measured by the year-over-year change in the Bureau of Labor Statistics’ Personal Consumption Expenditures price index—is 4.1%, the highest since 1991.
Most respondents said it would take at least until the second half of 2023, including more than a third who forecast 2024 or later. Since the survey was conducted in mid-November—before the omicron variant of COVID-19 was identified—it doesn’t account for how that news might impact their outlook.
The Federal Reserve has determined that roughly 2% is a healthy middle ground for inflation, one that enables a strong economy without hurting people’s buying power too much. The longer inflation stays hotter than that, the more likely the Fed is to do things to put a lid on it, like raise the benchmark federal funds rate. That rate influences all kinds of other interest rates, impacting the cost of borrowing on credit cards, mortgages, and other loans.
Inflation has been double that 2% sweet spot because of the pandemic’s disruptions to supplies and the labor market. It’s hard for businesses to manufacture and transport enough goods to satisfy consumers’ unusually voracious demand for stuff.
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