Fed could face a nightmare scenario

The Federal Reserve has done a reasonable job of managing the surge in consumer price inflation over the past year and a half. Having peaked at 9.1% year-over-year in June, the Consumer Price Index declined in November to 7.1% year-over-year, the slowest pace since December 2021. But with price growth still drastically above normal levels, labor markets quite tight, and household spending resilient, the Fed's challenges are far from over. As we move into 2023, inflation will continue to be a key risk to both the US and foreign economies.