(November 1, 2022) The Federal Open Market Committee (FOMC), in its latest meeting on September 21, 2022, forecasted that the Personal Consumption Expenditures (PCE) inflation rate in the United States will average at 5.4% in 2022, and then decline to 2.8% in 2023. The FOMC — the US Federal Reserve System's monetary policymaking body, which seeks to foster price stability — publishes inflation projections from its twelve members four times a year, in conjunction with their meetings in March, June, September, and December.

PCE inflation refers to the percent change in the Personal Consumption Expenditures price index. It is used by the Federal Reserve as a primary measure of inflation in determining inflation goals. Other agencies such as the International Monetary Fund, United Nations Department of Economic and Social Affairs, Organisation for Economic Co-operation and Development, European Commission, and U.S. Department of Agriculture give inflation forecasts in terms of Consumer Price Index (CPI). Due to the differences in the "baskets" of goods considered, the two inflation measures are not identical: since 1970, CPI inflation has been an average of 0.5 percentage points higher than PCE inflation.

Different agencies' predictions differ, putting US CPI inflation within the range of 7.0% to 8.1% percent in 2022 and around 2.8-3.5% in 2023. All agencies predicted that CPI inflation in 2023 will be 0.8-1.5% higher compared to the Federal Reserve target of 2%. By 2025, CPI inflation in the US is expected to return to 2%.

The inflation rate depends on the balance between aggregate supply and aggregate demand within the economy. Labor market conditions and inflation expectations are the major demand side forces: a decrease in the unemployment rate means number of employees increases, which, in turn, increases demand and inflation.

  • According to the survey of economists by FocusEconomics, CPI inflation is expected to average 8.0% in 2022.
  • According to the US Bureau of Labor Statistics (BLS), in September 2022 the US unemployment rate was 3.5%, which is 1.2 percentage points lower than a year before.
  • One-year inflation expectations decreased to 5.4% in September 2022 in the New York Fed’s Survey of Consumer Expectations compared to 6.8% in June 2022.
  • US GDP, representing the country's aggregate demand, increased at annual rate of 2.6% in the third quarter of 2022, according to the U.S. Bureau of Economic Analysis (BEA).
  • Current US CPI inflation, which is released monthly by the US BLS, averaged 8.2% in September 2022. The US PCE inflation rate released by BEA for Q3 2022 was 4.2% on average.


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