Business economists expect high inflation through 2023

Business economists expect inflation to increase in the fourth quarter and stay elevated for years, according to a new survey. 

Nearly three-quarters of the economists surveyed by the National Association for Business Economics said that they don’t expect annual inflation to fall below the Federal Reserve’s 2% target until the second half of 2023 or later.

NABE Vice President Julia Coronado, the founder and president of MacroPolicy Perspectives, said in a news release that the survey panelists have “significantly” ramped up their inflation expectations since September. 

“The core consumer price index, which excludes food and energy costs, is now expected to rise 6.0% from the fourth quarter of 2020 to the fourth quarter of 2021, compared to the September forecast of a 5.1% increase over the same period,” she said.

Additionally, two-thirds of the economists said they expect wage increases to keep prices high over the next three years. 

NABE panelists also downgraded their economic growth forecasts for the second NABE survey in a row. The median prediction of inflation-adjusted gross domestic product growth from the end of 2020 to the end of 2021 is now at 4.9% — down from a 5.6% forecast in September and a 6.7% prediction back in May. 

On a positive note, more than half of those surveyed said they expect the U.S. to reach full employment within a year. The November jobs report was a disappointment and fell flat of expectations, although the unemployment rate ticked down by 0.4 percentage points to 4.2%, where it was in mid-2017. 

Still, the economy is millions of jobs short from before the pandemic, when the unemployment rate was at 3.5%, its lowest level in decades.

Inflation clocked in at 6.2% for the year ending in October, nearly 0.5% above predictions and the highest level in three decades. The new, highly anticipated consumer price index numbers for November will be released on Friday, and forecasters predict that the rate of inflation will increase to 6.7% on a year-over-year basis. 

Inflationary pressures have prompted Fed Chairman Jerome Powell to say that the central bank may move more quickly toward raising its interest rate target.