Inflation: the return to normal in the United States is expected in the second half of 2022

After reaching a record high since 2008 in September, with +5.4% over one year, inflation should stabilize around 2% within a few months, estimated Sunday the U.S. Secretary of the Treasury. The price increases from one month to another “have already fallen significantly from the very high rates observed in the spring and early summer,” added Janet Yellen.

While consumer prices have been soaring in the United States for several months, inflation is expected to fall back to around 2% in the second half of 2022, U.S. Treasury Secretary Janet Yellen said on CNN Sunday. Already, in mid-October, the IMF wanted to reassure by indicating that it did not fear that inflation could turn into a “train out of control” in the advanced countries, in the words of the managing director of the institution, Kristalina Georgieva. Janet Yellen’s prediction is in line with the IMF’s that prices should stabilize by mid-2022.

For her part, ECB President Christine Lagarde keeps repeating that it is necessary to avoid “overreacting” to the surge in prices in the euro zone, especially at a time when the post-Covid recovery remains fragile and hampered by the global crisis in supply chains. The European Central Bank is thus expected to take a wait-and-see attitude on Thursday and maintain its expansionary course. The U.S. Federal Reserve is expected to begin reducing its asset purchases soon but is not expected to raise interest rates, as the job market remains fragile, said Jerome Powell, its chairman, on October 22. The reopening of the global economy has led to significant friction between supply and demand around the world, limiting the availability of raw materials. In addition, there is still a shortage of labor.

A surge that is beginning to subside

In the United States, consumer prices observed in September were up 5.4% compared to the same time period in 2020. They also accelerated again in September compared to the previous month, by 0.4% compared to 0.3% in August. Nonetheless, the month-to-month price increases “have already fallen off significantly from the very strong rates seen in the spring and early summer,” Janet Yellen said Sunday.

“The one-year inflation rate is going to continue to be high into next year … but I expect it to improve by the middle or end of next year,” she added. The U.S. central bank is targeting an inflation rate of about 2%. While Americans “haven’t seen price increases this high in a long time,” she acknowledged. On the other hand, the spending in the massive investment plans being negotiated in Congress will not overly fuel this inflation because “it is spread over ten years, not one year,” she also said.

Biden’s social reform and infrastructure plans were the subject of intensive negotiations last week, during which he agreed to drastically reduce spending on social and climate measures. The U.S. president originally wanted to pass a $3.5 trillion, 10-year program to improve health care, education and early childhood care. During discussions within his party, that amount was reduced to about $2 trillion. The other $1.2 trillion program is for investments in infrastructure upgrades. On the content of these vast reforms, the Democratic leader of the House of Representatives, Nancy Pelosi, said on Sunday that the elected members of her party could reach a compromise within the week by the richest people in the United States. It would at best finance 10% of the project, said Nancy Pelosi.