Natalie Brunell: Double Digit Inflation in 2023?!

While the past few months have showed a slowing rate of inflation, consumer prices are still rising at their highest levels in over 40 years. Most traders see inflation heading down in the months ahead. The real question is how quickly it will come back down.

However, there are a few factors that could point to inflation rising into the next year. Prices could even start rising at double-digit rates, close to the worst levels of the 1970s and 1980s.

So far, inflation has been blamed on everything from poor weather to Vladimir Putin, rather than the government’s creation of large amounts of money.

But inflation could come roaring back next year. The most likely culprit would be a further market or economic drop that causes central bankers to pivot. And, if combined with more fiscal policy, it’s likely that we could be back to an era of money printing.

As that happens, we may move back to a situation seen in early 2020, when the uncertainty of a global pandemic caused a big drop in stocks. But a rapid change in interest rates back to zero and the printing of trillions of dollars saved the stock market.

While we’re still dealing with the inflationary costs of that today, a further move towards more stimulus would simply add to today’s high inflation rates. That suggests markets could be in for more turmoil in the months ahead.

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