HomeBusinessEconomyAfter a shocker in 2021, where might inflation go in 2022?

After a shocker in 2021, where might inflation go in 2022?

THE ONLY thing that proved transitory about inflation in America in 2021 was the consensus that it would subside. The left-hand chart shows that analysts consistently revised up their predictions, trailing reality. Consumer prices are now rising by nearly 7% compared with a year earlier, the fastest pace since 1982. What does the future hold? The right-hand chart presents two scenarios. In the first, month-on-month inflation immediately falls back to its pre-pandemic trajectory. Even so, it would take until the end of 2022 for annual inflation to slow to the 2% pace that used to be the norm. In the second case, consumer prices rise at the same monthly clip seen over the past year. Annual inflation would soar to nearly 8% in February, and stay elevated. Either way, one prediction seems rock-solid: the Federal Reserve will start raising interest rates in 2022, as the central bank itself indicated on December 15th.

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This article appeared in the Finance & economics section of the print edition under the headline “After a shocker in 2021, where might inflation go in 2022?”

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