Economists Dial Up Inflation Target…Fed Could See Speedier End to Easy Money Policies

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Economists surveyed by the National Association for Business Economics are predicting that annual inflation will remain above 2% over the next three years as a result of rising wages and strong demand for goods and services.

NABE panelists project that the overall consumer price index will rise 6% year-over-year in the fourth quarter of 2021, compared to September’s forecast of 5.1%. CPI inflation is expected to remain elevated by the end of 2022 at 2.8% year-over-year, compared to September’s forecast of 2.4%.

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The core PCE price index, which excludes food and energy, is expected to rise 4.1% year-over-year in the fourth quarter, compared to September’s 3.8% forecast, and slow to a 2.6% year-over-year rate in the fourth quarter of 2022. About 71% of NABE survey respondents anticipate the core PCE gauge will not decline to or below the Federal Reserve’s 2% target until the second half of 2023 or later.

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  • The Fed is likely to decide to double the pace of its taper to $30 billion a month at its December meeting, comments from central bank officials suggest.
  • Initial discussions could also begin about when to raise interest rates and by how much next year.
  • Fed Chair Jerome Powell in testimony last week supported the idea of a faster taper and made a dramatic shift when he said the big concern with another wave of the coronavirus or new variant was inflation.


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