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What Will Inflation’s Downward Path Look Like?

As price increases seem to have passed their peak, the next big question for the U.S. economy will be how far—and how fast—inflation will fall.

By Ben Holland, Reade Pickert & Rich Miller | January 11, 2023 at 09:58 AM
Photo: A worker pulls boxes of donated food from warehouse shelves at the Dare to Care Food Bank in Louisville, Kentucky, on June 16, 2022. Photographer: Luke Sharrett/Bloomberg A worker pulls boxes of donated food from warehouse shelves at the Dare to Care Food Bank in Louisville, Kentucky, on June 16, 2022. Photographer: Luke Sharrett/Bloomberg

The question that obsessed financial markets last year was when and where U.S. inflation would peak. The 2023 version will likely be how far—and how fast—it will come down.

Economists may not see eye-to-eye on the answer, but they more or less agree about where to look for it.

The path of inflation will be determined in a handful of crucial areas of the economy. Some are domestic—what happens in American labor and housing markets will be key—and others are global, as supply chains get reconfigured and trading blocs are reshuffled amid great-power tensions.

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