U.S. inflation dropping to a 3% range by end of 2023 is already 'baked in' the data, Adam Posen says - MarketWatch
S E E D E D C O N T E N T
Published: Dec. 27, 2022 at 2:54 p.m. ET By
Greg Robb
Former Bank of England official says key unknowns are how high interest rates will go above 5.25% to get inflation all the way back to Fed's 2% target
Federal Reserve Board Chairman Jerome Powell speaks at a news conference earlier this month.
Nicholas Kamm /AFP/Getty Images
"'Getting from the high inflation where we are now towards 3[%] is baked in.' "
— Adam Posen, president of the Peterson Institute for International Economics
The inflation outlook will look a lot different in 12 months, according to Adam Posen, the former Bank of England official who now runs the Peterson Institute for International Economics.
In an interview with Bloomberg Television, Posen said that one year from now inflation is going to have a "three handle and will be trending down." This decline is "pretty much baked in," he added.
In November, the core rate of the Fed's favorite inflation measure, the personal consumption expenditure index, was up at a 4.7% rate.
Posen said the key question for the outlook was how fast inflation might go down from around 3.3% at the end of next year to the Fed's 2% inflation target. And the related question was how high the Fed would need to raise its benchmark interest rate above the high end of the range reading of 5.25% that he expects in February to get it there.
Inflation is already trending lower due to improvements in the supply chain, Posen said. Some more improvement should come from falling rents.
So most of the future improvement in inflation in 2023 will come from Fed tightening, he said.
What's keeping inflation high? Wages are rising at a pace that is out of step with low and declining productivity growth, he said. This is true despite the fact that workers are are still not seeing much benefit from higher wages due to inflation.
There are also mismatches with the right workers for the job openings, he said.
Higher immigration is the "simplist, fastest, cleanist, most beneficial answer" to this problem, Posen said.
Read: 'We need more people,' says Fed's Powell
"I wish there were people in the cabinet and within President Biden's hearing who would stand up for immigration," he said.
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Happy New Year!
Hope that this prediction is based on different models than those used to previously predict last year’s transitory inflation.
Lol ..... our friends on the left are mining furiously for news that somehow justifies the abysmal job they’ve been doing on the economy. It’s tough mining in those used up mines.
Thank God Powell is still acting independently from those kooky Bidenites .....
End of NEXT year? Bring on the champagne............./S
Thinking this is a much more optimistic one than the last one. And that one was crap from the word go.
Grasping at straws; and praying they can spin the coming recession into a good thing.
Garland might have to indict Trump just to deflect the news; and given Brandon and the Democrats a respite.
The only ones that will really pay attention to that is the left.
Well, it worked for the Romans. It's their Circus Maximus.
Wait!!!! I thought it was Putin's fault? Damn it's hard to keep up with the Democrats excuses.
"Economics is just math" - Bill Clinton
Things like Covid and its related supply chain disruptions or Putin's War in Ukraine are the kind wild cards that are not predictable, but once they happen get "Cooked into the books". Raising interest rates and cutting the deficit are proving effective just as our best economists predicated they would. Month over month inflation is steadily declining already!
The deficit is not being reduced.
Reality has a perverse way of messing up these economic experts "expectations".
They can't even get it right on a short term basis.
Plus, we have no idea of what kind of calamities the New Year will bring.
In pretty much every case it seems..................in all categories.
One poor meme deserves another
Just trying to copy your poorly done style.
Such a great, original retort. Do you copyright your work?
You bitch when people get your name wrong. Use my correct name or do not respond to me.
Too calm .... here you go:
Patient zero TDS
I really love this piece of the article. What is keeping inflation so high is that wages are rising too fast and are too high. So we need more immigration with people who will work the jobs for less money.
So just ignore that even though inflation might be back in the 2% range by the end of the year, prices will still be how much higher than a year previously, wages lost ground already against inflation and they want to be able to pay people even less in wages in the future to combat inflation. Somehow I don't see this getting a vote of approval from local unions.
No probably not. It might factor into this administration's border policy or lack of one though.....
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And yet, I do have a diploma from a major university with my name and the word "Economics" engraved on it. Do you?
If you didn't like inflation, you would dislike deflation even more
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The gullibility of some of the left will never cease to amaze me. Where is the huge recession that their poster child Paul Krugman said was coming. These idiots will believe anything that makes democrats look good and republicans look bad.
In our rearview mirror. It was January to June...
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Seems Santa was very busy this year despite all the republican doom and gloom...
Sure, they’re just good little worker drones and following the Democrat principle of overextending on debt.
Ho ho ho!
Since a lot of shopping was done online, of course people are going to use cards...
I use/used my debit card. I hate interest. Not that I don't have some old CC debt but the summbitches keep raising the interest rates because of the damned Fed's moves. It's ridiculous what they charge.
I have a separate card that I use for online transactions. It has a smaller limit, in case something happened.
When I got my current mortgage the changing interest rate loans were still available. I don't even know if they still do that or not. I would never trust that as of course rates could rise. I feel sorry for people that happen to be in that position.
I locked mine in at a fixed rate. It is either 3 or 4 percent. I think 3. I need to check.
Mine is locked at 3.75. I wouldn't think of selling and buying in this environment. Double what my rate is now at 7+%
What gets me is a lot of apartments around here are more expensive than my mortage payment.
Here too.
Or stuff just costs more.
Meanwhile, outside the North Pole, food banks are straining under the increased demand.
So people spent on themselves instead of donating...
How...exactly.. does that explain increased demand?
Imo there is always increased demand. Every year.
There would especially be increased demand if no one is donating.
There is a big difference between a 3% increas and a 17% increase.
That's not how that works.
Seriously??
We're not talking about shortages, which could be caused by lower donations. We're talking about the number of people who need to go to a food bank in order to feed their families. That has nothing to do with whether or not anybody donated.
I take your numbers. I just go by what I see where I am. And things around here are about the same as always.
I cannot say that here. The local news has been running hard with requests for more donations to food banks as they have had record numbers coming thru to get food aid. There's one near where I bank and when they are open the lines are crazy long, never less than 20 cars in line every time I go past that parking lot. I would say the demand is definitely greater this year for people looking for help.
Maybe because I live in a gaming and shopping town.
That is basically what we are known for and have. Casinos and shopping.
I think it was last year the casinos made record breaking numbers.
The word you are looking for is reality.
It's amusing watching people cling to the predictions of the same crowd who so spectacularly fucked up their predications about inflation to begin with.
And 3% inflation is 50% higher than where it should be in a healthy economy. But when you shill for Biden and bad is the best you can hope for, suddenly bad news is good.
Yeah, my favorite is when they come back with inflation/gas/food costs are down when they’re still 50,100, 200% higher than when bonzo was elected.