Even as US Inflation Climbs, Wall Street Sees Steep Fall Coming

Many Wall Street economists are holding firm to their bet that US inflation will slow substantially over the next year even as they’re being forced to keep raising their predictions for coming months.

With most having shared the Federal Reserve’s failure to predict the stubbornness of last year’s price pressures, economists continue to be surprised by how much inflation is spreading through the economy. That was laid bare by last week’s core consumer price index for September, which beat the expectations of most forecasters by jumping to a 40-year high of 6.6%.

But even before that release, economists had boosted their inflation projections for the next few quarters. Despite that, many still see repeated interest-rate hikes from the Fed eventually closing much of the gap with the central bank’s 2% goal by 2024.

“I think everyone’s working backwards and saying, let’s take the Fed at their word that they’re resolved to bring inflation down,” said Andrew Hollenhorst, chief US economist at Citigroup Inc. Without projections that higher rates will stifle economic growth and boost unemployment, “then there wouldn’t be this expectation that inflation would move lower.”