(Bloomberg), Economists have increased their U.S. Inflation forecasts — again — while downgrading expectations for economic growth throughout most 2023. These are growing risks as the Federal Reserve seeks to reduce the rapid rate of price rise in recent decades.

In the third quarter of this year’s consumer price index, it will be 5.7%, an increase from the previous month’s 4.5%, according to the Bloomberg survey. This is according to the median prediction of 72 economists. From 20% in March, there is a 27.5% chance that the country will experience a recession within the next year. Tuesday will see the release of CPI data for March.

The survey, conducted April 1 to 7, captures economists’ forecasts after the first full month of Russia’s war in Ukraine, which has driven up prices of major commodities like food and oil and stressed fragile supply chains. That’s bolstering expectations for rapid inflation to persist and consumer spending to slow, complicating the Fed’s task to tame prices without tipping the economy into a recession.

“With the Fed seemingly feeling the need to ‘catch up’ to regain control of inflation and inflation expectations, a rapid-fire pace of aggressive interest rate increases heightens the chances of a policy miss-step that could be enough to topple the economy into a recession,” said James Knightley, chief international economist at ING. 

From the first quarter 2022 to the third quarter 2023, respondents raised their expectations for the price indexes they were following in the survey. The Fed’s preferred gauge, the personal consumption expenditures price index, is anticipated to average 4.7% year-over-year in the final three months of the year, more than double the central bank’s 2% target.

As consumer spending is expected to decline, economic growth estimates were lower than in the earlier survey. But, the spending trend for 2022’s first three months is stronger than last month.

As businesses increase wages in order to keep and attract employees, the average hourly earning is likely to go up.

©2022 Bloomberg L.P.