text: InFocus: What to expect from the US economy this yearInflation numbers are looking bleak, consumer sentiment is down, and there’s a cloud lingering over the US economy this year. In yesterday’s Federal Open Market Committee press conference, Federal Reserve chairman Jay Powell was optimistic that the Fed can get inflation under control. I doubt that will be the case. February’s Consumer Price Index (CPI) came in at a 7.9% annualized rate of inflation. That’s up from 7.5% in January and 7% in December 2021. The Producers Price Index (PPI) broke 10%, which is reason to believe CPI will continue upward in March. As is often stated, real inflation is likely much higher than 7.9% – probably something on the order of 16%, if calculated in the same way CPI was calculated in the 70s. There’s also strong reason to believe the Fed won’t be able to wrangle down inflation through interest hikes anytime soon. In the chart below, going back to the Great Inflation, the Fed has had to hike rates as high or higher than the rate of inflation. With CPI at 7.9% and the Fed raising the Federal Funds rate by 25 basis points per quarter, this could be a years-long process. Powell blamed most of the inflation on demand and logistics bottlenecks, which is a fair point. Powell said that he expected demand to temper due to higher prices, which in theory would bring inflation down.