The inflation rate of the consumer price index for April released this week shows price increases for everyday goods continue to soar near a four-decade high, but the measure’s slight drop from the month before has led several experts to speculate that inflation hit its peak in March, and it will continue to drop for the rest of 2022.
Ahead of the Labor Department’s latest CPI reading, Treasury Secretary Janet Yellen told Congress on Tuesday that “inflation has been very high, but many analysts think that it’s recently peaked and, at least on a year-over-year basis, is likely to come down.”
One of them is Yung-Yu Ma, chief investment strategist at BMO Wealth Management, who told Reuters, “Under the hood, there continue to be signs that inflation, labor market tightness, and supply chain woes may have all peaked.”
The next day, the CPI report indicated inflation had cooled to 8.3% year over year in April, down from 8.5% in March. But even if the annual inflation rate continues to decline, consumers may not feel relief in their wallets any time soon.
ING’s chief international economist, James Knightley, wrote this week that he believes “March 2022 will have marked the peak for annual inflation,” but predicted that the descent back to the Federal Reserve‘s target rate of 2% will be “long” and “slow.”
Mark Thornton, a senior fellow and chair in Austrian economics at the Mises Institute, agrees, and adds that the descent could be painful.
“I would be surprised if CPI inflation quickly returned to 2% or even close to it,” Thornton told FOX Business. “While the CPI index is a naturally smooth data series and change from month to month is not, reversing the trend will require reversing the economy by tanking stocks, handicapping businesses, and choking off jobs.”
He said the Fed “has to do this to stop the price inflation that their own monetary inflation is causing.”