As Americans struggle with high inflation during the holiday season, many expect high prices to become the norm in 2023.
In fact, 40% of Americans believe elevated inflation rates will never come down and 62% expect everyday costs will be higher in 2023, according to a survey by real-estate data company Clever. More than one-third of respondents (38%) say they already can’t afford everyday goods, the survey found.
But while price increases are still unusually high, inflation seems to be coming down slowly.
The Consumer Price Index (CPI), a measure of inflation, increased 7.1% year-over-year in November. That’s a slowdown from the 7.7% increase in October. That registers the smallest monthly increase since the end of 2021, according to a report by the Bureau of Labor Statistics (BLS). The level of inflation is still close to its June high of 9.1%, when it reached its highest level since the 1980s.
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Interest rates expected to keep increasing in 2023
The Federal Reserve has raised interest rates several times in 2022 to fight inflation. Most recently, the Fed raised interest rates by 50 basis points. That rate spike pushed the federal funds rate to a targeted range of 4.25% to 4.5%, the highest level in 15 years.
While the Fed’s chairman Jerome Powell says interest rate increases won’t be as aggressive as in previous months, any federal funds rate increase can have an impact on the interest rates for financial products such as credit cards.
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Experts warn of recession
While there’s no strict definition of a recession, many economists describe it as two consecutive quarters of negative economic growth — a blow the country has taken this year.
However, economists at Bank of America (BofA) expect a mild recession in 2023. “Our economists forecast the recession ending by 3Q 2023,” BofA said in its Year Ahead report.
The Mortgage Bankers Association (MBA) forecasts a recession beginning in early 2023.
“We are really highly confident we are going to be in a recession next year,” Mike Fratantoni, the MBA’s chief economist and senior vice president, said at the 2022 MBA Annual conference in Nashville.
Nonetheless, more than half (53%) of Americans believe the economy is already in a recession.
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