(Bloomberg) — Economists have raised their U.S. inflation forecasts once more and lowered expectations for economic growth for most of 2023, underscoring growing risks to the outlook as the Federal Reserve tries to rein in the fastest price rise in decades.
The consumer price index would now average 5.7% in the last three months of the year, down from an estimated 4.5% a month ago, according to the median forecast of 72 economists in a Bloomberg survey. The chance of a recession over the next year also increased in March from 20% to 27.5%. The March CPI report will be published on Tuesday.
© Bloomberg
Long Lasting | Consumer price index (YoY) forecasts continue to creep higher
The survey, conducted from April 1 to 7, reflects economists’ forecasts following the first full month of Russia’s war in Ukraine, which has pushed up the prices of major commodities such as food and oil, and has put fragile supply chains to the test. That is reinforcing expectations that rapid inflation will persist and consumer spending will will slow downcomplicating the Fed’s task of controlling prices without sending the economy into recession.
“Given the apparent need for the Fed to ‘catch up’ to regain control of inflation and inflation expectations, a rapid pace of sharp interest rate increases raises the chances of a monetary policy misstep that might be enough to push the economy into a recession,” said James Knightley, chief international economist at ING.
Respondents raised their forecasts for each price index tracked in the survey from the first quarter of 2022 to the third quarter of 2023. The Fed’s preferred gauge, the personal consumption expenditures price index, is expected to average 4 .7% year-on-year in the last three months of the year, more than double the central bank’s 2% target.
Economic growth estimates were revised down from the previous survey as expectations for future consumer spending softened. However, spending for the first three months of 2022 is expected to be stronger now than it was last month.
Median hourly earnings are expected to be higher than previous surveys showed, rising 5.6% and 5.3% from a year earlier in the second and third quarters, respectively, as companies continue to raise wages to attract and retain workers.
original note:
Economists Boost Inflation Expectations in Worrying Sign for Fed
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
