Inflation will take years to fall to 2% target, according to Cleveland Fed model

Inflation in the U.S. is unlikely to fall to the Federal Reserve’s 2% target for at least three more years, according to a new report published by the Cleveland Federal Reserve Bank.The findings suggest the pandemic-era shocks that stoked high inflation, including supply chain disruptions and rabid consumer demand, have been resolved, but that there are other “very persistent” forces fueling price pressures within the economy.”There are both theoretical and empirical reasons to think that, absent X factors such as continued favorable supply shocks or strong productivity gains, the last half-mile could well take several years,” Cleveland Fed economist Randal Verbrugge wrote in the report.That suggests inflation will not return to pre-pandemic levels until mid-2027 at the earliest.WHY ARE GROCERIES STILL SO EXPENSIVE?Customers shop at a supermarket in Foster City, California, on Sept. 13, 2023.Verbrugge differentiates between the two sources of inflation: extrinsic, meaning external shocks like production costs or the overheated labor market, and intrinsic, meaning i …

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