February 20, 2023 — Inflation Cools for Seventh Month in a Row

FEBRUARY 20, 2023 – INFLATION COOLS FOR SEVENTH MONTH IN A ROW

Consumer prices were up 6.4 percent in January – the seventh straight month of cooling – down from the high of 9.1 percent reported in June. Fed Chair Jerome Powell thinks inflation is on the right track, but to get it down to the Fed’s targeted 2 percent will “take a bit of time” and will “be bumpy.”

Surge pricing, seen over the last two years seems to be abating.  Supply chains have been sorted out, shipping costs are down and consumers are shifting spending towards services from goods.  As interest rates have been rising, the demand for housing is slowing, pushing down costs a bit. Wage growth has shown signs of decelerating, but it is high enough to keep up the pressure on inflation. Core inflation is slowing but remains at 5.6 percent year-over-year.

Monetary policy tends to run at a lag, so the declines in the inflation rate are due to increases instituted last year; the full effect of the latest Fed’s actions will not be evident until late this year. We fully expect the Fed to keep raising rates; their next meeting takes place on March 21-22.