Treasury

Economists predict inflation will dip below 3% in Q3

They pushed the milestone back a quarter from the Philadelphia Fed’s previous survey.
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In February, economists told the Philadelphia Fed that the consumer price index (CPI) would hit the sub-3% mark this quarter. What a difference a few months can make.

Ahead of the release of April’s CPI, economists raised their predictions for inflation for the current quarter as well as for 2024, 2025, and over the next decade, according to the Philly branch’s quarterly survey.

In their first-quarter survey, economists predicted that inflation would hit 2.5% this quarter, but this quarter’s average has jumped to 3.4%—roughly the same as the March CPI of 3.5% and the April CPI of 3.4%. They do expect rates to hit 2.5% in the fourth quarter.

Annually, economists forecast a 3.1% inflation rate for 2024 (up from their 2.5% prediction in February). Reflecting confidence that longer-run inflation will come down, economists had much smaller revisions of their forecasts from February: from 2.2% to 2.4% for the annual rate of inflation in 2025, a jump of 2.3% to 2.5% for the rate from 2024 to 2028, and 2.24% to 2.33% for 2024 to 2033.

Economists contrasted their prediction for stronger, longer inflation with a boost to their outlook for economic growth and jobs. They forecast this quarter’s GDP to grow 2.1% quarter over quarter, revising up their February prediction of 1.5%. They also revised their jobs forecast upward to an average of 200,000 new jobs per month in the second quarter—an increase of more than 80,000—and boosted their annual average for 2024 from 190,000 jobs per month to nearly 213,000. The forecast for average job growth next year increased from 111,700 to 140,600. Unemployment projections stayed roughly the same, with economists expecting the jobless rate to hit 4% in the second half of the year and 4.1% in the first half of 2025.

Correction 05/16/2024: This article previously misstated economists’ average forecast in the first quarter survey, for CPI in the second quarter. It also misstated the time frame for economists’ second-quarter GDP forecast and misreferenced the Federal Reserve’s preferred measure for inflation.
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