St. Louis Fed, Report: Where Might Inflation Head? 

“Despite higher interest rates and inflation, consumption demand has remained strong. Households have been making up for pandemic-related privations, largely financed by excess savings that resulted from the fiscal assistance provided during the pandemic. Even higher interest rates may put further downward pressure on consumption demand (by penalizing credit and incentivizing savings). However, there is a strong possibility that consumption will remain high while excess savings persist, resulting in high inflation for longer despite a contractionary monetary policy.”

“Inflation for 2023 may end up being well above the 2% target, though perhaps not as elevated as in 2021 and 2022. The moderation in the inflation rates for food and core goods, should it persist, would contribute to the moderation in overall inflation. Housing may eventually contribute as well. In contrast, core services excluding housing may continue to keep inflation elevated, sustained by pent-up demand and the ability to self-finance excess expenditures. It remains an open question as to how much of this excess inflationary pressure will be arrested by contractionary monetary policy, and hence, how long it will take for inflation to return to the Federal Reserve’s 2% target.”