Inflation is projected to run well above the Federal Reserve’s target rate this year and it’ll take longer to recede toward the 2 per cent goal, according to Bloomberg’s latest monthly survey of forecasters.

The consumer price index will average 5 per cent this year, up from the previous month’s projection of 4.6 per cent, according the the median of 76 economists surveyed Feb. 4-10. The survey preceded the government’s latest CPI report, which showed inflation jumped 7.5 per cent in January from a year ago, a fresh four-decade high.

The personal consumption expenditures index, which is the Fed’s preferred inflation metric, will likely average 4.2 per cent in 2022, firmer than the 3.8 per cent projection from last month. Both measures will average more than 2 per cent in 2023, they said.

Inflation, running at the fastest pace in 40 years by either gauge, is the top concern for policy makers at the Fed, who have been under pressure to rein it in. They’re prepared to start raising interest rates in March, and traders are increasing their bets for a half-point hike next month.

The increase in consumer prices last month was broad-based and showed that price pressures are extending beyond pandemic-related goods categories like cars to services such as health insurance and rents.

“This surprisingly high CPI reading will likely cause more FOMC members to favor a more aggressive rate-hike path,” Bloomberg economists Anna Wong and Andrew Husby said in a note Thursday. “We expect inflation to get worse before it improves, peaking at around 7.8 per cent in next month’s report.”

U.S. growth probably took a big hit as well to start the year. Expectations for gross domestic product for the first quarter were cut in half to an annualized 1.5 per cent after economists fully assessed the omicron variant’s impact as well as greater-than-expected inflation. Growth estimates were boosted slightly for the second quarter and reduced for the third.

Much of the first-quarter weakness can be attributed to consumer spending, now just expected to rise at a 1.8 per cent rate compared with 2.5 per cent in the January survey. Inflation is eating away at Americans’ paychecks, leaving less discretionary income after high food and gas prices.