Rating agency Fitch is out with growth and inflation forecasts for US and the world

  • Sees world recovery boosting prices but runaway inflation is unlikely
  • Faster economic recoveries boosting prices as supply chains have struggled to keep up with rapidly expanding consumer durables demand
  • Slower growth, supply adjustments, switch to services consumption, fading impacts from US stimulus should see rate of inflation decline in 2022
  • Now expects world GDP to grow by 6.3% in 2021. Sees slower growth of 4.3% in 2022
  • Raises 2021 growth forecast for most developed economies, with US revised up to 6.8% from 6.2%. Euro zone raised to 5.0% from 4.7%
  • Now incorporated in estimate of impact of Pres. Biden's infrastructure plans in US forecasts for 2022 and 2023
  • upward pressure on US core goods prices is likely to persist through 2021 but will ease in 2022
  • services inflation at this year and next will be constrained by labor market slack, which will Wage growth
  • Expects US CPI to fall from 4.1% at end of 2021 to 2.2 percent by end of 2022

The big question, is if inflation rises all the way to 4.1%, what will the Federal Reserve do?