Vanguard economic and market outlook for 2023: Inflation above target
Success for central banks in terms of returning inflation back to target is likely to be measured in years, not months and quarters. Going forward, our own views are that inflation remains above target, which usually is around 2% for most central banks. It is likely to remain above target for at least into 2024, if not 2025. Recently released information by those central banks has shown that they held similar views.
Understanding the drivers of inflation
What's important is, with each of the inflation releases, lifting up the hood a little bit to try to understand what the drivers are. You know, are these longer-term drivers such as stickier prices associated with services, are those starting to come down? Is it goods disinflation, which happens a little bit more quickly, is that what's really driving any sort of miss to the upside or downside? Really getting a handle on that is going to go a long way towards informing our views not only on inflation but other macro fundamentals that are impacted by inflation going forward.