US inflation to overshoot 2% consensus-view outlook to beyond 3%
In 2022, the U.S. Fed forecasts inflation to fall back to 2%. But the inflation model developed by the then Fed Chair Yellen (who is the current Treasury Secretary) says otherwise.
Her model uses slack (unemployment relative to NAIRU) import prices and expectations as its key drivers. Despite a widely held view that inflation relationships have shifted, this model has actually done a very good job of tracking inflation dynamics since 2015, including in the past year. Slack disappears rapidly through 2022; import (goods) prices rise more briskly; and inflation expectations move up.
