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Inflation in the United States continues to cool, falling in April 2023 to its lowest level in two years. But the 4.9% inflation rate reported for April, while way down from its June 2022 high of 9.1%, is still well above the Federal Reserve’s 2% inflation target. According to the FOMC, it’s the rate “most consistent with [their] mandate for maximum employment and price stability.”

But is that target rate realistic? We recently asked four top economists if the U.S. could, in fact, reach 2% inflation. And because the inflation discussion is part of a larger conversation around other economic forces, we also asked them about the biggest economic risks that the U.S. could face this year.

These are their responses.

Blu Putnam, Chief Economist, CME Group

“As U.S. inflation recedes from its pandemic surge, a key question is whether it will revert all the way back to its 2.5-decade pattern of averaging 2% a year as it did from 1994 through 2020. Unfortunately, probably not.

The long period of sustained low inflation was enabled by globalization (low-cost supply chains), the Internet age (empowering consumers to comparison shop), and demographics (providing a steady supply of new workers). Globalization is in retreat. The gains from technology for consumers have been realized. There are now demographic headwinds for labor costs as baby boomers retire and fewer young people enter the workforce.

Inflation is receding, but the Fed’s 2% target may be difficult to attain and sustain.”

Dana Peterson, Chief Economist, The Conference Board

“The United States will see 2% inflation likely by the end of 2024. However, it will not be without some pain. The Fed has already hiked the federal funds target rate to 5% - 5.25%, and there is risk of at least one more increase. Importantly, the aggressive tightening from Fed policy and stricter bank lending conditions amid the banking crisis may result in a short and shallow recession in 2023.”

“The greatest risks to the U.S. outlook in 2023 are recession linked to Fed tightening to combat inflation and a possible default on the U.S. federal debt, the latter of which would likely cause an immediate global financial crisis. Geopolitical risks also threaten the U.S. economy, with respect to the war in Ukraine impacting supply chains and stoking inflation, and the United States’ tense relationship with China along technology, investment, currency, trade and military fault lines.”

John Rutledge, Chief Investment Strategist, Safanad; CNBC Economics Contributor

“Inflation is falling sharply already and is likely to be below 2% by year-end. About half of 2022’s alarmingly high inflation was caused by restricted supplies of goods and services due to COVID lockdowns, factory shutdowns and broken supply lines. Recent reports indicate those problems are rapidly disappearing, demand is cooling, and businesses are marking down product to reduce inventories.

April headline CPI inflation over 12 months was 4.9% but measured properly — by excluding the nonsensical owners’ equivalent rent component that makes up 25.4% of the index — April inflation was just 2.9%. Falling home prices, tight credit and slowing service spending will bring the number below 2% by year-end.”

“Events so far this year have reinforced my belief that the erratic and unpredictable behavior of autocrats poses the biggest risk to the United States and global economies in 2023. Supply chain blockages have largely been resolved. Inflation is already retreating toward 2%. And the string of bank failures that has tightened credit has exposed the fact that the Fed hiked rates too much, too fast, forcing the Fed to stop raising rates. But the autocrat problem — major decisions made by a single person — has been made worse by Vladimir Putin’s nuclear threats.”

Brian Wesbury, Chief Economist, First Trust Advisors L.P.

“The U.S. economy is still absorbing and responding to the unprecedented 40% increase in the M2 measure of the money supply that happened during the first two years of COVID policies.  Inflation was not transitory. Supply chain issues and war in Ukraine pushed up some prices, but without all that money printing, inflation would be much lower already. The Fed seems to be getting this money printing under control. If it stays the course, inflation could eventually fall back to 2%, but not as quickly as many think.”

“We were worried that the end of monetary and fiscal stimulus from COVID-19 would lead the United States into a recession in 2023. So far, this hasn’t happened, but rising rates and a tightening in monetary policy are showing up in the banking system. This is like a canary in a coal mine. The biggest risk is that the economy slips into a recession before inflation is completely eradicated.”



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