Fed President Thomas Barkin was optimistic that inflation would continue to moderate, pointing out that all indicators appear to be stabilising.
In his view, consumers are still spending, but they are becoming more selective, opting for cheaper alternatives such as switching from Target to Walmart or choosing McDonald's 5 dollar menu. This trend indicates that consumers are not resigned to accepting price rises, even if inflation is slowing.
Barkin also highlighted the impact of the elasticity of demand, which is forcing companies to recognise that their pricing power is limited. He remains optimistic, however, and expects good results on the inflation front in the months ahead.
He did, however, mention a number of medium-term factors that are likely to keep inflationary pressure up, such as tensions in the Middle East that could affect oil prices, and a limited supply of housing which, combined with high interest rates, is weighing on the property market. He mentioned other factors, such as demographics, global fragmentation, the energy transition and the growing demand for energy from data centres, all of which could contribute to inflationary pressure in the medium term.
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