higher prices of gas groceries new cars and mortgage rates got you down americans may have to get used to it the rate of inflation might not return to prepandemic levels of less than 2 for at least another three years that’s the blunt message the federal reserve delivered on wednesday for the first time since 2007 the central bank predicted inflation would end the year above 3 in fact well above that level the fed estimated the rate of us inflation using its favorite pce price index would average a whopping 43 in 2022 that’s up from the bank’s 26 estimate four months ago and just 19 a year earlier these are earthquakelike alterations for a conservative central bank that rarely make big changes in its forecasts it may have had no choice economists say the yearly increase in the cost of living has soared to a 40year high of 79 based on the better known consumer price index the pce index has climbed a somewhat lesser 61 in the most recent 12month span faced with the first serious threat of high inflation since the early 1980s the fed on wednesday raised a key shortterm interest rate for the first time in four years it also forecast a higherthanexpected series of rate increases in 2023 these moves are likely to slow us growth and retard demand as part of the strategy to rebalance an offkilter economy “as it turns out the fed went further than we and many others expected” said chief economist richard moody of regions financial “clearly the committee intended to send an aggressive signal of their resolve to rein in inflation and keep inflation expectations in check” the central bank badly underestimated the rise in inflation last year for months senior fed officials brushed off the surge in prices as ‘transitory” a result of the reopening of the us economy the flood of fresh spending as people got out and about the thinking went overwhelmed the ability of business to meet the demand nor were companies able to get enough materials on time especially from foreign suppliers in china and elsewhere because of disruptions in global trade tied to the pandemic all of these disruptions and shortages would soon end the fed believed and result in a quick reversal in inflationary pressures the central bank turned out to be dead wrong prices rose even faster and spread from just a smattering of goods and services to almost everything not only that but the cost of labor surged to the highest level in decades and raised the specter of a wageprice spiral the likes of which the us hasn’t seen since the 1970s “we’ve had price stability for a long time and maybe come to have taken it for granted” fed chairman jerome powell admitted on wednesday last month he appeared to hint in congressional testimony that the central bank waited too long to act also read here’ what the fed’s powell has to say about inflation when is inflation going to return to precrisis lows powell insisted the fed will do whatever it takes to squelch inflation but he expects the process to take a few years the central bank predicts inflation will slow to 27 in 2023 and to 23 in 2024 eventually the rate of price increases should subside to the fed’s 2 target of course the fed thought the same thing last year what could throw the central bank off again powell suggested is the russian invasion of ukraine he noted the war has already caused a shortterm increase in inflation what’s more a broader effort by the west to limit or end trade with russia could further disrupt global supply lines he said russia is a major producer of oil wheat and other key commodities still powell insisted the fed will fulfill its mission of getting inflation back under control “we will take the necessary steps to ensure that high inflation does not become entrenched” he said over and over again on wednesday