by Calculated Risk on 1/02/2022 03:24:00 PM
Sunday, January 02, 2022
Question #5 for 2022: Will the core inflation rate increase or decrease by December 2022?
Earlier I posted some questions on my blog: Ten Economic Questions for 2022. Some of these questions concern real estate (inventory, house prices, housing credit, housing starts, new home sales), and I posted those in the newsletter (others like GDP and employment will be on my blog).
I'm adding some thoughts, and maybe some predictions for each question.
5) Inflation: Core PCE was up 4.7% YoY through November. This was the highest YoY increase in core PCE since 1989. The FOMC is forecasting the YoY change in core PCE will be in the 2.5% to 3.0% range in Q4 2022. Will the core inflation rate increase or decrease by December 2022?
Although there are different measure for inflation, they all show inflation well above the Fed's 2% inflation target.
Note: I follow several measures of inflation, median CPI and trimmed-mean CPI from the Cleveland Fed. Core PCE prices (monthly from the BEA) and core CPI (from the BLS).
Click on graph for larger image.
This graph shows the year-over-year change for these four key measures of inflation. The recent spike in inflation is obvious - and will likely get worse over the next few months. Goldman Sachs economists recently wrote:
"The current inflation surge is likely to get worse before it gets better"
by the end of [2022] we expect core PCE inflation to fall to 2.5%. Admittedly, the key driver of our forecast—the partial resolution of supply-demand imbalances in the durable goods sector—is hard to time. But we do not see underlying wage growth or inflation expectations as inconsistent with the Fed’s 2% inflation goal, and therefore expect inflation to begin to come down meaningfully.
Some thoughts:
• Question #2 for 2022: Will the remaining jobs lost in 2020 return in 2022, or will job growth be sluggish?
• Question #3 for 2022: What will the unemployment rate be in December 2022?
• Question #4 for 2022: Will the overall participation rate increase to pre-pandemic levels (63.4% in February 2020)?
• Question #5 for 2022: Will the core inflation rate increase or decrease by December 2022?
• Question #6 for 2022: Will the Fed raise rates in 2022? If so, how many times?
• Question #7 for 2022: How about housing starts and new home sales in 2022?
• Question #8 for 2022: Housing Credit: Will we see easier mortgage lending in 2022?
• Question #9 for 2022: What will happen with house prices in 2022?
• Question #10 for 2022: Will inventory increase as the pandemic subsides, or will inventory decrease further in 2022?
Last 10 Posts
- May 14 at 7:15 PM Thursday: Unemployment Claims, Retail Sales, PPI, NY & Philly Fed Mfg, Fed Chair Powell Speaks, Industrial Production, Homebuilder Survey
- May 14 at 1:26 PM Part 2: Current State of the Housing Market; Overview for mid-May 2025
- May 14 at 10:36 AM Q1 NY Fed Report: Mortgage Originations by Credit Score, Delinquencies Increase, Foreclosures Increase
- May 14 at 7:00 AM MBA: Mortgage Applications Increase in Latest MBA Weekly Survey
- May 13 at 7:56 PM Wednesday: Mortgage Applications
- May 13 at 12:39 PM Cleveland Fed: Median CPI increased 0.3% and Trimmed-mean CPI increased 0.2% in April
- May 13 at 11:14 AM NY Fed Q1 Report: Change in Household Debt Balances Mixed; Student Loan Delinquencies Rise Sharply
- May 13 at 10:48 AM MBA: Mortgage Delinquencies Increased Slightly in Q1 2025
- May 13 at 8:46 AM YoY Measures of Inflation: Services, Goods and Shelter
- May 13 at 8:30 AM BLS: CPI Increased 0.2% in April; Core CPI increased 0.2%
In Memoriam: Doris "Tanta" Dungey
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