Inflation This Year Will Help Tame It in 2022
Supply and demand got so out of whack during the pandemic, we won't know until 2023 whether looming price gains across the economy are just temporary.
Supplies of new autos should catch up to demand by next year, easing price pressures.
Photographer: Justin Sullivan/Getty Images
Dallas Federal Reserve President Robert Kaplan this week became the first Fed official to say that he anticipates a rate increase in 2022. Lots of investors agree, convinced that the passage of the latest pandemic relief package and a gradual reopening of the economy will heat up inflation later this year, which is part of why longer-term interest rates have been rising.
I see it differently. It's because the rate of inflation is likely to increase this year — coupled with the Fed's focus on year-over-year changes in prices — that we'll probably see less inflation and lower odds of a rate hike next year. It's strange to say, but the most dovish scenario for the Fed in 2022 is for certain products and services to get their Covid-19-recovery price surges out of the way in 2021.