UPDATE JANUARY 25, 2023 – First off, 11 months to Christmas! I just wanted to add to the record that I personally believe the ceiling for the July 12th reading will be 1.4%. Obviously, as the months go on and more data is available, I will be able to refine my forecast. But, for now, I am fairly confident the reading will be between 0% and 1.4%. We shall see….
UPDATE JANUARY 19, 2023 – This was buried in the original post below. I wanted to make it clear, and go on record, that I believe when the July 12th CPI announcement comes out there is a 95%+ chance of annual inflation being below 2%. It should definitely be in the 0%-2% range. That is the Fed’s target range. I haven’t seen anyone forecast this. If you have, please let me know. I like to check out prognosticators that have similar opinions to me and see if I can figure out what data they are using. New data between now and then can change this forecast. But, right now, I am not seeing anything that could occur to do such. However, that is why they are called black swan events, eh:) We will check back on July 12th and see if this prediction was wrong or right.
Do note that even if inflation goes down to 0%, that just means prices remain at the current high levels. People want prices to decline. But, that only occurs in a Depression or Recession. Which do you prefer – a Recession to have prices decline a few percentage points or a growing economy with prices rising? People have always adjusted their income and expenses to account for the higher prices. Just like 50 years ago when gas prices went from 30 cents a gallon to $1 a gallon. Many price shocks have occurred and we simply adjust our style of living. The same will happen this year as people accept that current prices are the new norm.
JANUARY 13, 2023 – The 2022 annual inflation rate ended at 6.5%. As I expected, that was below the 7.0%-7.1% my data was forecasting.
The next release is February 14th. My forecast is 5.6%-5.7%. That is aggressive. I don’t think I will be on the high end this time.
As I mentioned last month, the 3-month and 6-month annualized inflation figures show us where annual inflation is headed. Those figures are currently 0% and 0.3%, respectively. Thus, the annual inflation rate has to decline in the months ahead.
By the end of the First Quarter, annual inflation should be in the 3%-4% range. It should definitely be below the Fed’s 2% target by the end of the 2nd Quarter.
Remember, ask those forecasting double-digit inflation how that is going:)
Shalom and Happy New Year!