U.S. inflation to return to Fed target by end-2024, says Moody's economist

NEW YORK, Feb. 28 (Xinhua) -- U.S. inflation would be back to the target set by the Federal Reserve by the end of 2024, said Mark Zandi, chief economist with Moody's Analytics on Wednesday.

Speaking at an online briefing, Zandi said U.S. inflation is moderating "reasonably and gracefully" as the effects of the COVID-19 pandemic and the Ukraine crisis are in the rearview mirror.

"There are still residual effects, but as those shocks have largely faded, inflation has come in, and without a significant weakening in the economy," said Zandi.

Zandi said the only significant difference between actual current inflation and the Fed target is the growth in the cost of housing services.

The good news is that such growth is tied to market rents, which have been very soft over the past year and will continue for the coming year thanks to the supply of more multifamily properties, according to Zandi.

The economist said the completion of more units causes a rise in vacancies and puts downward pressure on rent in the apartment market, adding it would become more evident in the coming year.

Zandi added that disinflation or deflation in China is translating into weaker import prices in the United States and globally, keeping inflation down.

Still, Zandi expected the U.S. personal consumption expenditures (PCE) price index for January, which is scheduled to be released on Thursday, to be on the hot side and a little strong.

U.S. PCE price index for January would see month-on-month growth of 0.3 percent, up from 0.2 percent in the previous month. The year-on-year expansion of the index would slow down to 2.4 percent in January, down from 2.6 percent in the previous month, according to forecast consensus.

"But, if you take a step back and take a look at inflation of the last couple of years, it's been coming in a very graceful way," said Zandi.

The Fed has kept the federal funds rate target at the 23-year high of 5.25 percent to 5.5 percent unchanged since September 2023 to drive down inflation.