US CPI: 2023 inflation forecast update

Major disinflation likely lies ahead in May and June, which is likely to ramp up pressure on the Fed to cut interest rates during 2H23.

In terms of the inflation debate, the next two months are likely to be of critical importance, with MAJOR disinflation likely on the way — I currently forecast a decline in the CPI and CPI ex-shelter, to 3.1% and 0.9% respectively, in June.

In-turn, this is likely to have major medium-term ramifications for the Fed’s policy outlook, with increasing political and broader public pressure likely to be applied on the Fed, to loosen its aggressive tightening.

For these reasons, and with several months having now past since publishing my initial 2023 inflation forecasts (which you can find here), I have decided that now is an important time to provide an update to my medium-term inflation forecasts.

Before delving into my medium-term forecasts, remember that inflation is highly unpredictable, incredibly difficult to forecast, and is subject to a wide array of changing variables. While this forecast is applicable at the time of publishing, my US CPI forecasts are therefore subject to ongoing re…