U.S. Inflation Expectations Mount in Latest Survey of Economists

The Marriner S. Eccles Federal Reserve building stands in Washington, D.C., U.S. (Photographer: Erin Scott/Bloomberg)

U.S. Inflation Expectations Mount in Latest Survey of Economists

Economists are warming to the idea of hotter inflation into early next year.

The latest monthly survey by Bloomberg shows forecasters have raised their projections for several measures of inflationary pressures -- the consumer price index, the personal consumption expenditures price index and the PCE measure excluding food and fuel -- for each quarter through March 2022.

U.S. Inflation Expectations Mount in Latest Survey of Economists

The CPI at the end of the second quarter this year will probably show a 3.8% increase from the same period last year, while the PCE price index is seen rising 3%, according to the survey of 71 economists from May 7 to May 13.

The latest projections, well above where they were at the start of the year, show the adjustments forecasters are making in response to supply shortages, shipping challenges, firmer demand and trillions of dollars in fiscal and monetary policy support.

“Supply capacity of the U.S. economy may not be able to keep pace with demand growth, which is already evident in supply shortages from semiconductors through to labor,” said James Knightley, chief international economist at ING. “We suspect inflation could remain more elevated for longer than the Federal Reserve is predicting.”

For their part, Fed officials view the pickup in price pressures as temporary and have signaled their intent to maintain ultra-easy policy even with inflation running above their 2% goal.

Forecasts for the PCE core price index, favored by Fed officials, were raised above 2% for each quarter through January-March next year.

2Q 20213Q 20214Q 20211Q 2022
PCE price index (current)3.0%2.7%2.7%2.3%
PCE price index (prior)2.6%2.2%2.3%2.0%
Core PCE price index (current)2.4%2.2%2.3%2.2%
Core PCE price index (prior)2.2%1.9%2.0%2.0%

Economists also raised their second-quarter growth forecasts in anticipation that government aid, faster vaccinations and more social activity will provide a bigger boost. The median estimate calls for a 9.3% annualized increase in gross domestic product, up from 8.1% in the April survey.

©2021 Bloomberg L.P.

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