US Inflation: Still a long way to go to 2% – Commerzbank

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Hopes of a swift further decline in the inflation rate have received a noticeable damper at the beginning of 2023. Accordingly, the Fed will probably raise interest rates several more times, economists at Commerzbank report.

“Our review of various core measures suggests that the inflation trend is probably still above 4%, way above the Fed’s 2% target.”

“The Fed will hope that the effects of rate hikes have not yet shown up because of the usual lags in their impact. This will change and price pressures will then ease noticeably as the year progresses. If this does not happen, the Fed has obviously not cooled demand sufficiently. Significantly more rate hikes than previously expected (our forecast: three further hikes by June of 25 basis points each to 5.50% for the upper end of the target range) would then be likely.”

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