MADISON, Wis.– CUNA Mutual’s chief economist is forecasting 7% inflation this year, then 3% in 2023 and 2% in 2024.
The forecast was included in the company’s latest Trends Report, which primarily features an update on credit union performance and which CUToday.info reported here.
“Economists believe inflation is caused by ‘too many dollars chasing too few goods’,” observed Chief Economist Steve Rick. “Over the last two years, the money supply rose a remarkable 42% due to three rounds of stimulus checks and record low-interest rates to give us the “too many dollars” part of the economic truism. The ‘too few goods’ is being caused by the pandemic-induced supply chain disruptions and the war in Ukraine.
Rick noted that on a year-ago basis, the headline Consumer Price Index rose 8.2%, down slightly from the 8.5% pace reported in March 2021, while the core CPI (excluding food and energy prices) rose 6.1%.
“The inflation rate may have peaked and is expected to slowly drift down to the Federal Reserve’s target of 2% over the next few years. We are currently forecasting 7% inflation this year, then 3% in 2023 and 2% in 2024,” Rick stated. “So far, the surge in actual past inflation has not unanchored future inflation expectations in the bond market. Currently, the Fed expects inflation to average 2.6% each year for the next 10 years. With inflation expectations still below 3%, we don’t believe long-term interest rates will experience a significant rise in the future.”
Mortgage Rate Outlook
In the report Rick pointed out the 10-year Treasury interest rate is currently trading around 2.75% and is only expected to rise to 3.25% over the next four years.
“This will keep the 30- year mortgage interest rate below 5.5% during the same period,” he said.
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