In speech, Chicago Fed President Charles Evans said he expected the US economy to growth in the range of 5-6% this year, and then moderate in 2022 and 2023 to 2-3% range. Unemployment rate would improve to pre-pandemic level of 3.5% by the end of 2023. However, underlying inflation “won’t be back to our goal until the mid-2020s”.
The near-term inflation outlook is “complex”. Supply constraints and price pressures are seen in “very strong” sectors but not the weak ones. Evans expected “some higher top-line inflation numbers” in the Spring due to temporary constraints. But after these factors “have run their course”, inflation will “settle down and end the year in the range of 1-1/2 to 1-3/4 percent.”
“When I think about my economic forecast, I am reasonably confident that we will reach our maximum employment goal over the next three years,” he added. “I am more concerned about the prospects for reaching our inflation mandate, however. Inflation is far too low today. And we have a long way to go to reach the magnitude of overshooting that I see as necessary to satisfy our average inflation objective.”
