A prominent economist predicted Wednesday that the U.S. economy’s inflation rate will drop by half within six months, providing much-needed relief to the middle class and other Americans who have struggled financially in recent years. Mark Zandi, chief economist at Moody’s Analytics, made the prediction in testimony before the Senate Committee on Banking, Housing and Urban Affairs, and in a new report from his company. Zandi said inflation will drop from 2% to 1% due to what he called an inevitable normalization of prices resulting from an anemic economy and low oil prices.
According to Mark Zandi of Moody’s Analytics, the rate of inflation in the United States will be cut in half over the course of the next six months.
His forecast assumes that oil prices stay where they are, that problems with the supply chain continue to be resolved, and that automobile prices start to rise. It comes right before another important report on inflation.
According to Zandi, the remainder might not alter.
The company’s top economist predicts that CPI, or consumer price inflation, will drop from a low of over 8% year-over-year right now to something close to half that of 4%.
The Bureau of Labor Statistics will publish its September consumer price index on Thursday. The Dow Jones is expected to rise 8.1% over the course of a year and 0.3% over the course of a month.
It will be challenging to go from 4% to the Fed’s objective. According to Zandi, the upper limit of that goal for the CPI is probably 2.5%. Since the final 150 basis points (or 1.5 percentage points) are tied to the inflation of services, which is linked to wages and the labour market, it will take some time to attain them. It will take some time for that to quiet down.
Overall, the Federal Reserve’s tightening of policy is driving the economy in the right direction, according to Zandi. His prediction indicated that the recent price increase should have peaked.
“Job growth is starting to decline. The next step is to get wage growth to slow down, which, in his opinion, will happen by the beginning of next year. This is necessary in order for the inflation rate to reduce and return to the target range.
He believes that the Federal Reserve will finish rising interest rates this winter at a pace of 4.5% or 4.75%.
“Then, I think they come to a stop and say they’re stopping here. I’m going to check around and see how things go, Zandi added. By the summer of next year, if everything continues to go as I have planned, we will be finished. We’ve just surpassed the top speed. Up to 2024, the funding rate will be in place. If I’m wrong, though, and inflation persists, they’ll reapply the brakes, which will bring about a recession.
