We Still Expect Elevated Inflation to Be Temporary
Once the vehicle shortage is resolved, inflation should be back on trend.
The story of inflation hasn’t changed in the last several months, in our view. The uptick in inflation has been driven primarily by the constrained supply of vehicles due to the semiconductor shortage. This shortage should be progressively resolved in the coming quarters. As such, we still expect elevated inflation to be a temporary phenomenon. We project 2.2% growth in the core Personal Consumption Expenditures Price Index over 2022-25, just modestly ahead of the Federal Reserve’s 2% target.