White House economic adviser Jared Bernstein told Fox News in a recent interview that inflation is likely to last longer than previously expected.
Bernstein told the outlet that he expects inflation to fall to around 4 percent for 2021, before falling to 2.3 percent in 2022. He didn’t say, well, he expects the rate to stay the same next year, but note inflation is likely to remain high in the middle of next year.
His expectations closely track the Fed’s most recent predictions. While Bernstein did not specify which inflation measure he was referring to, his estimate is in line with the most recent personal consumption expenditure (PCE) inflation projections from the Federal Open Market Committee (FOMC), the Fed’s policy-making body.
Following its most recent meeting of September 21-22, the FOMC released a revised set of economic projections (PDF) that projected the PCE inflation rate for 2021 to 4.2 percent, a sharp rise from June’s estimate of 3.4 percent. Upside down is the modification.
For 2022, Fed policymakers expect PCE inflation to be 2.2 percent, up from an earlier estimate of 2.1 percent.
However, 18 members of the FOMC differed in their predictions, ranging from 1.7 percent to 3.0 percent in next year’s PCE inflation forecast.
Bernstein, like Fed officials and many economists, blames supply-side disruptions for the bulk of recent inflation growth. He argued that when supply chain dislocations are removed, inflation will subside.
Some economists have warned of an increased risk of stagflation – where economic growth falls while inflation remains high.
Economist Nouriel Roubini, best known for his gloomy-yet-accurate forecast of the 2008 financial crash – a prediction he made at a time of peak market euphoria – warned in a recent op-ed that global Supply chain crisis, combined with high debt ratios. And ultra-lax monetary and fiscal policies threaten to turn the “mild stagflation” of recent months into a full-blown stagflation crisis.
Former Morgan Stanley Asia president Stephen Roach on Wednesday became the latest high-profile economist to sound the alarm at the risk of the United States facing a 1970s-style impasse. Roach believes rising energy prices are causing major damage to struggling supply chains, increasing the risk of higher price hikes even when the economy is slowing.
While Fed officials say the current fight against inflation is temporary and will end once supply chain dislocations ease, they acknowledge that inflation has been higher and longer-lasting than previously thought.
New York Federal Reserve Bank President John Williams said on September 27 that consumer expectations that the inflation rate remained “well anchored” around the Fed’s 2 percent objective for several years down the road, although he noted that the above On the other hand there are risks and “a great deal of uncertainty” surrounding the outlook for inflation.
This News Originally From – The Epoch Times