02/13/2023
• Evidence continues to build around moderating inflation. The Consumer Price Index (CPI) trajectory over the past three months, together with the signal from leading indicators of inflation (like the Institute for Supply Management (ISM) prices paid for inputs by manufacturing and services firms), indicates that core inflation could fall to 3% by year-end.
• The path of disinflation is unlikely to be a straight line and will require the labor-market tightness to ease. But even with the ongoing strength in job creation and historic low unemployment, wage pressures have started to moderate.
This graph (Bloomberg, Edward Jones calculations) shows the decline in prices paid by manufacturing and services firms as reported by the ISM Purchasing Managers Index (PMI) suggesting that inflation could drop towards 3% by the end of the year.
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