
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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