Despite consumer prices hitting a new four-decade high last month, the latest data show several signs that prices may be moderated slightly, with economists now predicting that inflation may have peaked—though they warn prices will likely remain elevated into next year.
Though consumer prices spiked 8.5% in the 12 months ending in March, core inflation—which excludes volatile food and energy prices—rose 0.3%, slightly lower than expected and leading some Wall Street experts to predict that inflation may have finally peaked.
“It’s possible that inflation could be topping out,” as there were definitely some “green shoots” in the data, says Lindsey Bell, Ally’s chief markets & money strategist.
“Consumer inflation likely peaked in March as the Russian invasion caused a sharp spike in food and energy costs,” says Nationwide senior economist Ben Ayers, adding that while prices should “slowly fade from here,” they are likely to remain high through 2022 and into 2023.
“This is likely near or at the top of the price gains,” says Beth Ann Bovino, chief US economist for S&P Global Ratings, though she warns, “the path back to normalization will take longer.”
Moody’s Analytics chief economist, Mark Zandi, similarly argues that inflation could now be close to reaching a high point: “It feels like we’re topping out,” he says, though the next few months will be “tough,” with the odds of a recession at one in three.
However, some believe that even with a small decline in the core reading last month, inflation could still surge higher—with food and shelter prices, in particular, expected to keep rising: “Make no mistake, these readings are still very high relative to recent history,” warns Bespoke Investment Group.