Inflation declining now — graph proves.
Caldwell 23 — Preston Caldwell, senior U.S. economist for Morningstar Research Services LLC, holds a Master of Business Administration from Rice University, 2023 (“Why We Expect Inflation to Fall in 2023,” Morningstar, May 26th, Available Online at https://www.morningstar.com/economy/why-we-expect-inflation-fall-2023-2, Accessed 06-24-2023)
Inflation in 2022 reached the highest level in over 40 years. But we expect inflation to fall dramatically over the next year.
Understanding why inflation will fall requires understanding why inflation became so bad in the first place. Over 2021 and 2022, strong consumer demand ran into a brick wall of supply constraints, causing prices to explode in many industries, especially food, energy, and durable goods.
But demand is cooling off, thanks greatly to the Federal Reserve’s interest-rate hikes. Just as importantly, supply constraints are disappearing. With the main causes of high inflation now running in reverse gear, the economy is set to receive a large deflationary impulse.
After peaking at 6.2% in 2022, we expect inflation to fall to 3.5% for 2023. Over 2024 to 2027, we expect inflation to average just 1.8%—below the Fed’s 2% target.