The recent easing in inflation, coupled with a clear downward trend in rents and a budding productivity boom, have prompted a revision in RSM’s inflation forecast for the year.
In the March issue of The Real Economy, RSM’s chief economist, Joseph Brusuelas, and U.S. economist, Tuan Nguyen, explain why they see inflation declining to the Federal Reserve’s target of 2% and why this will lay the groundwork for the central bank to begin cutting interest rates.
Anticipating four policy rate reductions by the Federal Reserve this year, starting in June, Brusuelas and Nguyen now expect the personal consumption expenditures index, the Fed’s preferred measure of inflation, to reach the central bank’s 2% target by midyear. The cost of rents, previously a sticking point, is likely to push the consumer price index below their original forecast of 2.5%.