Is inflation expected to continue in 2024?

At the beginning of 2023, inflation in the US stood at 6.4% annually. Since then, it has fallen to 3.1%. A combination of increased interest rates and changing patterns of consumption have helped bring the level down.

However, this figure for inflation is still not at the Federal Reserves’ 2% target. While further interest rate increases are not expected, there is still some way to go before the Fed has succeeded.

“Over the six months ending in October, core inflation ran at an annual rate of 2.5%, and while the lower inflation readings of the past few months are welcome, that progress must continue if we are to reach our 2% objective,” Fed Chair Jerome Powell has said.

“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease.”

The inflation predictions for 2024

The Fed has published its own predictions for inflation next year. By the end of 2024, the Federal Open Market Committee (FOMC) expects inflation to be 2.2% annually based on the core personal consumption expenditures price index, before hitting that 2% target in 2025. It had originally expected inflation to not return to 2% before 2026. The FOMC thinks core PCE inflation will be 2.2% by 2025.

Other inflation predictions from the private sector anticipate different levels. The Federal Reserve Bank of St Louis a level of 2.5% by the end of 2024 while Goldman Sachs projects an inflation rate of 2.4%

A fall in the rate of inflation would precipitate interest rates being reduced, with Forbes predicting 4.6% by the end of 2024. Bill Adams, chief economist for Comerica Bank, doesn’t expect rates to begin falling until summer 2024. The current target range is between 5.25%-5.5%.

So while inflation will be higher than the central bank’s target, it will not be at the levels of 2022 unless there are mor emajor disruptions to the global economy.