My readers will know that I’m not generally an optimist by nature, so why am I so confident that inflation will ease this year? The answer lies in history.
The economic dislocations and resulting inflation caused by the pandemic look a lot like the adjustments required after the two world wars. The record shows that prices soared after both wars, as controls were lifted, production shifted back from military to consumer goods, and suppressed demand (fueled by excess wartime savings) was satisfied. In both cases, the rate of inflation returned to something far more normal after two years.
If the two-year rule holds, and I believe it will, 2023 should be the year the fever breaks.