A panel of business economists has raised its expectations for inflation compared to its September forecast, with two-thirds of them predicting wage increases will keep inflation higher over the next three years.
A survey by the National Association for Business Economics shows that it expects consumer prices to rise 6 percent in the final quarter of the year compared to the year-ago quarter, marking a sharp upward revision to the 5.1 percent rate of inflation.
The core PCE price index, the Fed's preferred inflation gauge, is expected to remain above the central bank's 2 percent target until at least the second half of the century, according to Julie Coronado, vice president of the National Association of Broadcasters.
According to the survey, panelists have increased their expectations for inflation since September, with the survey showing the core PCE inflation rate to hit 4.9 percent for 2021.
The Federal Reserve said in its most recent summary of economic projections that it expects a reading of 3.7 percent for all of 2021. The September prediction was higher than the June one.
The Fed expects core PCE to fall to 2.3 percent next year and then fall again in 2023 to 2.2 percent, but the Chair of the Fed said that it was time to retire.
The Fed has been under pressure to tighten monetary policy because of the high inflation that hit a 31 year high in the 12 months through October. Policymakers are considering an accelerated timetable for ending the central bank's massive bond-buying program. The Fed would be able to raise the rate earlier if the taper schedule was faster.
The labor market recovery has been lagging, and Powell said the Fed has a test for scaling back stimulus that has been met.
The unemployment rate has fallen to 4.2 percent, and the labor force participation rate has risen.
The labor force participation rate, which rose to 61.8 percent in November, is not expected to return to its pre-pandemic level of 6 according to thePanelists.
A full rebound in the labor force participation rate is expected by the end of next year, but just 5 percent of the half that expects it will happen will do so.
A number of economists have raised the alarm about the current bout of inflation, and the views of the panel of the National Association of Broadcasters are in line with those comments.
By Tom Ozimek
Tom Ozimek has experience in journalism, deposit insurance, marketing and communications. Roy Peter Clark's best writing advice is to hit your target and leave the best for last.
