Experts Warn Inflation Isn’t Going Anywhere!

Hold on tight, because it looks like inflation is here to stay. According to a new survey by the National Association for Business Economics (NABE), America’s top economists foresee persistently high inflation rates throughout 2023 and even beyond.

In the recently released May 2023 outlook survey, a whopping 98% of the business forecasters surveyed revealed their belief that inflation, as measured by the consumer price index (CPI), will remain above the Federal Reserve’s targeted 2% year-over-year rate.

Just to put things into perspective, the most recent inflation report, based on April data, showed an inflation rate of 4.9% year-over-year. So, it’s no wonder that only a meager 2% of the NABE forecasters surveyed think inflation will slow down to 2% by the second half of this year. A whopping 59% of these experts don’t believe we’ll see inflation decline to the Fed’s target until 2025 or even later.

The NABE panel’s median forecast suggests that inflation will gradually ease but remain above the target level this year and the next. They predict that the personal consumption expenditures price index (PCE) inflation, excluding food and energy, will drop from 4.9% in Q1 of 2023 to 3% by the end of this year. And the numbers keep declining, with a projected 2.4% in Q2 of 2024 and 2.2% in Q4 of the same year.

The Federal Reserve is doing its best to control inflation by raising interest rates, but these efforts can go either way. According to the NABE survey, a majority of 68% of panelists believe that the biggest upside risk to the economy is the Fed’s ability to achieve a “soft landing” by taming inflation without causing a significant recession.
On the flip side, when it comes to the biggest downside risk facing the economy, a substantial 42% of NABE panelists pinpointed “too much monetary tightness” as the most significant threat. The NABE survey predicts that the Fed will put a pause on interest rate hikes until the end of this year and then start cutting rates in early 2024. The benchmark federal funds rate target will remain at 5.125% from Q2 to Q4 of 2023. After that, get ready for the descent: 4.625% in Q1 2024, 4.375% in Q2, 3.875% in Q3, and 3.583% in the exhilarating finale of Q4 next year.