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Business leaders predict that inflation will continue to slow

Americans are hoping for a return to prepandemic levels of inflation, and recent surveys suggest they may get their wish. The Cleveland Federal Reserve’s four-times-a-year survey of business leaders shows that top executives expect the rate of inflation to taper to an average of 3.4% in the next 12 months, using the consumer-price index.

The good news is that the CPI is already there – the rate of inflation in the 12 months that ended in December was at 3.4%, and it’s expected to drop to 2.9% in the January report, due out Tuesday morning. However, a better measure of future inflation was somewhat higher – the core CPI, which omits food and energy, stood at a 12-month rate of 3.9% at the end of 2023.

A long-running survey of consumers also found that Americans expect inflation to continue to decelerate towards prepandemic levels. Households expect 2.9% inflation in the next year, according to the consumer sentiment survey. What both surveys show is that inflation expectations are well anchored – nobody expects inflation to move up or down much from current levels.

The Fed wants inflation to return to its target of 2% a year, but it’s not there yet. However, if consumers and businesses both think it will succeed in reaching its target, it will make the central bank’s job easier

By Editor

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