*by Kevin Slater, CEO, Lead Advisor, CFP®*

This chart tracks the US annual inflation rate as measured by the Personal Consumption Expenditures (PCE) Price Index over the past 62 years. The PCE is the Federal Reserve’s official measure of inflation. Four things worth noting:

Inflation exceeded 5% in only three periods
The longest period above 5% was from June 1972 until November 1983

Inflation exceeded 6% twice during that same period and only once since (Jan – Oct 2022)
Several times inflation fell rapidly, only to quickly bounce back even higher
During the second inflation hump of 1979-1983, the US economy (GDP) shrank by 3%

The Federal Reserve knows its history. Inflation can be persistent, sneaky, volatile, and painful. While they may stop increasing interest rates in 2023, reducing rates may not happen as soon or as quickly as investors assume. The Fed wants to make sure the recent high inflation doesn’t surge right back as it did in 1977. Having a big Dromedary (single hump) camel sneak into your tent is bad enough, a Bactrian (double hump) camel popping in would be a nightmare.