What most economists expected in November has been confirmed: Inflation may have peaked, providing relief from the worst inflation in more than 40 years. That’s part of the latest price reading on Tuesday. A broad basket of goods and services showed that prices rose by 0.1% last month, which means an increase of 7.1% from a year ago. Although inflation rates remain high, there is widespread agreement that the peak has passed. “Inflation was negative in 2022, but the outlook for 2023 is good,” said Bill Adams, chief economist at Comerica. “Retail chains are operating well, business records are high, and the major shortages that caused inflation in 2020 have been resolved. Energy prices have decreased slightly in recent months, and food prices also decreased slightly in November.” Indeed, the soft reading of the CPI was due to the fact that income levels were falling or declining. Energy prices were down 1.6% at the start. Used car prices, which drove inflation during the period, fell by 2.9%. Bacon was down 1.8%, seafood was down 1.4% and airfare was down 3%. And workers got a break, with hourly earnings rising 0.5% on the month, although they were still down about 2% last year. We are also optimistic that political parties can help reduce inflation. If China continues to reopen and abandon its zero-Covid policy, this should present a deadly threat. What happens here, however, is complicated. The Federal Reserve’s interest rate hikes — six, taking the central bank’s short-term lending rate to 3.75 percent, with more to come — are still unlikely to pass through their economy. Central bankers tend to say that monetary policy changes occur with “long and variable lags” that usually don’t last more than a year. In fact, the only sector where interest rates have increased so far is housing. So with much of the tightening still in place, the recession that accompanies the recession has yet to materialize. Critics of the Fed worry that the rate hike may have gone too far and could weigh heavily on the economy once it ends. “The decrease in inflation seems to be driven more by the stabilization of the post-pandemic (finally) playing more than it appears 425. [basis points] inflation (including tomorrow’s expected 50 bps hike) the Fed has started to act,” said Josh Jamner, chief market strategist at ClearBridge Investments. that’s still to come in 2023 and the economy appears to be slowing down on its own, creating problems the biggest financial crisis as we see it in the coming year.” Economists also strongly agree that next year will probably fall. That’s promising, given that the Atlanta Fed is targeting GDP growth in the fourth quarter of 3.2%, which would be the best for the year. The Fed is reducing funds to the tune of $95 billion per month. So inflation is slowing and the economy is cooling, there is reason to warn that this “shallow” year may be similar to the 2021 announcement. ,” said the PNC official. economist Kurt Rankin. “But it’s alarming that the Fed is willing to act because unabated inflation could do more damage to the US economy than PNC sees.” If the economy shrinks more than expected in 2023, this presents another problem for the Fed. If the recession deepens and lasts longer than expected, markets and politicians may pressure the Fed to start easing again. “It’s possible that we could be on track for a 2% recession next year,” said Joseph LaVorgna, chief economist at SMBC Nikko Securities. “In this time of transparency and the current political climate, I can’t imagine asking for them to get better if the economy starts to collapse next year.” The Fed concludes its two-day meeting on Wednesday, with markets expecting a 0.5 percent increase in the federal funds rate. This could lead to short-term lending to 4.25%-4.5%, the highest rate in more than 15 years. However, following the CPI report of low-cost traders “cheap,” or at the end of the Fed rate. The market now expects the central bank to hike to around 4.84% before stopping, lower than the most recent target of 5%.