Inflation is slowing and is likely to be substantially lower this year compared to 2022. Nevertheless, wage inflation remains elevated at rates that don’t align with the Fed’s 2% inflation target. Add to that the financial sector difficulties, and inflation could be allowed to stay higher for some time if central banks put the brakes on interest rate hikes to ensure financial sector stability. And in the longer run, rising “green” investment and higher defense spending following Russia’s aggression in Ukraine suggest that inflation is likely to be higher over the next 10 years than it has been in the last 10.
