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Will Inflation Fall in 2023?

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Inflation in the US stood at 7.7% year-on-year, four-tenths of a percentage point lower than in September, according to data released by the Bureau of Labor Statistics (BLS). However, the economic climate continues to be of concern to Americans.

In June, inflation reached its highest figure in forty years, 9.1 %, although in July it dropped six-tenths to 8.5 % and since then it has been falling slightly at a rate of one or two-tenths each month, to the current four-tenths.

Economist Daniel Di Martino explains in an interview with El American that due to the decisions made by the Federal Reserve regarding interest rates, we will see a drop in inflation, especially in the real estate sector.

“Inflation in the housing sector is going to decrease in the short term because of the increase in interest rates, which will cause people to buy fewer houses. The housing market is going to cool down, but in the medium and long term that is going to be the big factor that will increase the cost of all products and our life in general,” Di Martino said.

Inflation in 2023

However, the economist argued that new housing construction will be necessary for there to be a real decrease in prices. “The high cost of housing has is a supply and demand issue. The supply is restricted because governments do not allow housing to be built in buildings, but only want houses to be built in many areas, especially in California, in some parts of Florida and New York. That increases the demand and increases the price.”

“I think inflation will stabilize at 2%, probably by 2024 and if there is a recession in 2023, it’s clearly going to come down even harder. I think the Fed does have it under control. The thing is that all these interest increases are going to increase the cost of government debt.”

Federal Reserve Chairman Jerome Powell said last Wednesday that interest rate hikes will begin to slow in December, hinting that the Fed’s next benchmark rate hike will be 0.50% instead of 0.75%.  

The U.S. central bank has raised the federal funds rate by three-quarters of a percentage point four times this year, leaving it at a target range of 3.75% to 4%, its highest level since 2008.

Di Martino argued that the Biden administration will have to cut back to reduce public spending, which will increase due to the Democrats’ economic measures. “The Federal Government is going to need to tighten the belt and is either going to have to decrease spending or there is going to be a big debt problem and that can generate a deeper economic crisis next year.”

Williams Perdomo es periodista y escritor, especializado en las fuentes Política y Cultura.