Before we delve deeper into a few aspects of the NABE survey, let us recall a basic concept first. What is persistent inflation? It is a tendency for the shock in prices to cause the inflation rate to be pushed away from the steady pace, including an inflation target. And this happens for a prolonged period. It is essential to consider persistent inflation and the consequences since it impacts the output price of lowering inflation. If a nation has high and persistent inflation, it can be explained as the central bank might be creating the amount of money in excess.
NABE economic policy survey – Economists anticipating persistent inflation
A survey report that was released on December 6th by NABE or National Association for Business Economics indicates that a panel of forecasters is predicting that consumer prices will surge 6% in the last quarter of the year in comparison to one year ago quarter, causing a sharp revision upward to 5.1% rate of inflation as predicted by the panel in September for an identical period.
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Julie Coronado, NABE’s vice president, says that 71% of the panel forecasters anticipate that the preferred inflation gauge of the Fed, which is known as the core PCE price index, will remain more than the 2% target of the central bank until at least the latter part of 2023.
While Federal Reserve is anticipating that the core PCE will drop remarkably this year to around 2.3% and then fall again in 2023 to 2.2%, Jerome Powell, the Fed Chair, believes that in an economy with persistent inflation, the factors that are pushing inflation higher will be around for the current and the following year as well.
Escalating inflation which in a year through October reached a 31-year high recording at 6.2% and one which is more than double the 0.9% of the monthly pace compared to September, has exerted a lot of pressure on the Federal Reserve to make the monetary policy settings tighter.
The US economy remains at 2.4 million jobs lower than what it was in the pre-pandemic levels, the rate of unemployment has dropped to 4.2%, and participation of the labor force has edged higher up.
Around 60% of the panelists of the NABE survey is expecting that the job market will eventually attain full employment by the end of the current year, however, there are splitting views over the labor force participation rate that edged up to 61.8% in November 2021, would return to the figures of the pre-pandemic levels of 63.3% as of February 2020.
Out of the 50% which expects a complete rebound in labor force participation rate, only 5% anticipates that this would likely occur by the end of the current year, with approximately 25% expecting recovery that will be protracted in the measure through 2024, or perhaps even at a later date.
