Inflation to fall rapidly in 2023, as recession bites

We expect the lagged impact of higher interest rates to push the real economy into a mild recession next year. Although that downturn will be accompanied by only a modest rebound in the unemployment rate, we expect both headline and core inflation to fall rapidly, eventually convincing the Fed to begin cutting interest rates before the end of 2023. That monetary loosening should trigger a rebound in GDP growth in 2024.