Inflation Falling Rapidly

Core inflation has been easing rapidly in response to supply chain repair and the Fed Funds rate increase.  It has fallen 3/10ths of a percent in each of the past 4 months. 

Sadly these things are not linear, but if they were we would have inflation at the target rate of 2% by the beginning of next year.  It is, of course due to the non-linear fashion of it all, possible that we hit that target sooner or later than that. It is, however, an indicator that the Fed will have to reverse direction sooner than expected and begin lowering interest rates so as not to overshoot their target or dip the economy into recession. 

Previously, most economists predicted that a short and shallow recession would be inevitable, but many are predicting that the sought after "soft landing" which would avoid a recession is completely possible.

From the Washington Post 2/3/23:

The Federal Reserve has raised interest rates eight consecutive times in the past year to cool the economy. This, among other factors, has prompted economists and executives to predict a recession will hit sometime this year. The ax has already been swinging in Silicon Valley for a few months, while more layoffs have also been reported across the wider world of media, logistics and other fields.

And yet: The jobs numbers released Friday showed that the nation’s employers added an astonishing 517,000 jobs on net in January. This was much higher than analysts had forecast. It also represented a sharp acceleration in net hiring, and was the fastest job growth in six months.

We can only predict the future with what we know, and so far, 2023 looks pretty damned good.

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