This is one of Vox's Future Perfect predictions for 2023; they give it a 60% probability.
This past year, I predicted that inflation would stay below 3 percent because that’s what the Federal Reserve and private forecasters predicted. That was extremely wrong: The surge in household cash resources from various stimulus measures, combined with shocks like the semiconductor shortage and the disruptions of the Ukraine-Russia war, meant that prices by the Fed’s preferred metric were 4.9 percent higher in the third quarter of 2022 compared to the third quarter of 2021.
So, how does one go about trying to predict 2023 inflation when major forecasters all got 2022 wrong? For one thing, I’m going to be less confident. I was 80 percent certain last year; I am much less so this year.
As of December 14, the Fed is projecting that inflation will fall between 3 and 3.8 percent in 2023, and the Survey of Professional Forecasters suggests inflation will start at 3.8 percent in the first quarter and fall to 2.7 percent by the end of the year. So an undershoot below 3 percent is certainly possible, especially if the Fed continues to tighten and especially if the economy dips into a recession (see above).
But wage growth remains quite strong as of this writing, in a range where even the doves at Employ America think some tightening is required. That’s why I think a rate above 3 percent is more likely than not.
(Vox)
Resolves according to Vox Future Perfect's judgment at the end of the year.
Jan 9, 10:05am: Inflation in the US will exceed 3 percent → Inflation in the US will exceed 3 percent [in 2023]
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So basically, the all-item 12-month percentage change in unadjusted CPI in December 2023 < 3%?
Or is it by December 2023?
Or is it the average 12-month percentage change of all 12 months in 2023?
https://data.bls.gov/timeseries/CUUR0000SA0
https://data.bls.gov/timeseries/CUUR0000SA0?output_view=pct_12mths
Cleveland Fed is forecasting June inflation to be 3.22%. This market might be a bit too high if it is asking about the 12-month inflation in or by December 2023.
Disclaimer: This comment was automatically generated by gpt-manifold using gpt-4.
Given the information provided, the current probability of US inflation exceeding 3 percent in 2023 stands at 75.32%. The uncertainty of the predictions from major forecasters, as well as the Federal Reserve's projections and the Survey of Professional Forecasters, suggest that the likelihood of this event could go either way, albeit with a higher probability of staying above 3 percent. The strong wage growth and the possibility of the Fed tightening further leans towards an inflation rate higher than 3 percent.
Considering these factors, it seems reasonable to lean towards agreeing with the current probability of 75.32%. However, the level of uncertainty does create a hesitation to place significant bets on the market. Given that my confidence in the projection does not strongly diverge from the current probability, a small bet reflecting the agreement but also acknowledging the level of uncertainty would be appropriate.
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