Ashworth suggested, it won’t likely elevate
them to a point where higher rates would start
restraining the economy anytime soon.
Few economists expect inflation to remain as
high as the nearly 7% annual pace it reached last
month. Gas prices have already come off their
peaks. Supply chain bottlenecks in some areas
are gradually easing. And government stimulus
payments, which helped spur a spike in spending
that boosted inflation, aren’t likely to return.
Still, economists say inflation probably won’t
drop far enough or quickly enough on its own
to forestall the need for rate hikes next year.
Housing costs, including apartment rents and
the cost of homeownership, which make up
about one-third of the consumer price index,
have been rising at a 5% annual pace the past
few months, economists at Goldman Sachs have
calculated. Restaurant prices jumped 5.8% in
November from a year ago, a nearly four-decade
high, partly reflecting higher wage costs. Such
increases will likely keep inflation above the
Fed’s 2% target next year.
With those dynamics in mind, the Fed may
also drop the word “transitory” on Wednesday
from the statement it issues after each policy
meeting. Powell said during the Senate
hearing that it was time to “retire” that phrase,
which had been widely interpreted to mean
that high inflation would prove to be just a
temporary phenomenon.