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Inflation Prediction as of August 2023 - CPI stable in the 3-3.5% range through year-end

Editors note: TCV Economist Bill Knudson's inflation forecasts have been on target over recent history. He brings 30+ years of experience and an intuitive approach that works.


Watch mortgage rates. The CPI forecast suggests downward mortgage rate pressure. For those that took out mortgages in the last 2 years, you may have a refi opportunity by year-end. It is all about the lag....

- Jeff Hulett

 

INFLATION History: Over the past 50 years, the US has had 3 inflationary time periods and all related to Oil/Gas prices. Note as fast as inflation spiked, it fell off just as dramatically.


It is worth noting that mortgage rates do follow the CPI lead but there is a lag time involved. Rates tend to rocket up and feather down---no one wants to be first to lower rates in case the market decreases stall.

 

INFLATION Forecast: The annual CPI total reported each month is a combined string of 12 months of data, think of it as being 12 dominoes, a new one comes on, the oldest one drops off. THESE are the 2 dominoes to look to see if the CPI will change. If July ’23 monthly rate is 0.3% it will replace the June ‘22 data point of 0.0% on 8.10.23 and the annual CPI will increase from 3.0% to ~3.3%.

 

Predicted July’s Monthly CPI to be released 8.10.23

 

It is a guesstimate that July’s monthly rate will be 0.3% when the actual is announced on 8.10.23. It could be higher or lower. As such the ANNUAL CPI for July will change accordingly. Below is a range of July monthly from 0.0% to 0.9%. The resulting annual CPI will range from 3.0% to 3.9%

 

If any one item in the CPI can quickly and materially impact CPI it is energy. While up since the beginning of the year, material changes have NOT occurred. They were up 10% from July 1 to Aug 1.






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