Inflation projections for 2023+

[Thomas Higgins]

As we look forward to 2023, there appears to be a discrepancy between the perceived tail risk of inflation by some investors and the expectations for inflation as reported by the Federal Reserve Bank of St. Louis. According to the Bank of America's December global fund-manager survey, investors believe that the biggest tail risk to the economy is inflation staying high. However, the St. Louis Fed reports that expectations for inflation over the next five years have continued to fall heading into the end of 2022.

Tail risk, also known as extreme risk or black swan risk, refers to the risk of rare and unlikely events that have the potential to significantly impact an investment or a market. These events are often difficult to predict and can have severe consequences, such as significant losses or market disruptions. Tail risk is typically associated with low-probability events, but it can have a large impact if it occurs.

This discrepancy could be due to a variety of factors, including differing economic analyses and data, as well as different investment strategies and risk appetites. It is important to note that both sources of information have their own biases and limitations, and it is important to consider multiple sources when making investment decisions. 

Where does the BP community think inflation is headed, and how long will it take the FED to begin lowering rates? 

Are people buying taking advantage of the reduction in buy pressure in the multifamily market?

Are people buying with bridge loans, all cash, or fixed debt? 

When considering which lender to use, how seriously do you look at yield maintenance and prepayment penalties on loans? 

Happy holidays!