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The economy’s fast-paced growth could slow somewhat as the Federal Reserve tries to bring inflation under control in the next few months, and as a result the economy could slow somewhat. But Jack Kleinhenz, chief economist for National Retail Federation (NRF), said that consumers are likely to keep on shopping as lower inflation eases uncertainty.

“The Fed’s tightening has kicked off a new cycle of adjustment and the outlook for interest rates has consequences for consumers and businesses alike,” Kleinhenz said. “There is a growing list of uncertainties, and the risks are mounting. But underlying strength and momentum from both the consumer and business sectors are likely to offset a modest slowdown and should leave the economy bustling forward this year.”

While the Fed’s actions could mean higher car and mortgage payments, Kleinhenz said household finances have remained strong despite consumers’ worries over inflation and the war in Ukraine. The 4% year-over-year increase in retail sales in March showed consumers have the willingness and ability to spend as a result of job growth, wage gains and wealth accumulated during the pandemic as well as low financial obligations relative to income.

Kleinhenz’s remarks came in the May issue of NRF’s Monthly Economic Review, which said inflation, though still strong, should slow in 2022, partly because year-over-year comparisons will be against already-elevated levels of spending in 2021. In addition, fiscal and monetary policies from the Fed and other agencies that have combined with ongoing pandemic-induced supply issues to drive inflation are coming to an end.

The “first whiff” of current inflation came in April 2021, when the Bureau of Economic Analysis’ Personal Consumption Expenditures Index – the Fed’s preferred measure of consumer inflation – jumped 3.6% over the year before, the report said. That was double the rate at the beginning of 2021 and the highest in 13 years. PCE inflation stood at 6.6% this March, the highest in decades, and the Fed now expects it to end 2022 at 4.3% even as this year’s numbers “lap” last year’s growth.

The Fed is working on two fronts to slow inflation. First, it increased interest rates by a quarter of a percentage point in March and is expected to slowly raise the federal funds rate to between 2.5 and 2.75% in 2023 – the highest level since the middle of the Great Recession in 2008. Secondly, this month it will likely begin reducing its assets holdings, which doubled to about $9 trillion during the pandemic. Selling off its balance sheet of government-backed and mortgage-backed securities should affect long-term interest rates and reduce the monetary stimulus the Fed has provided.

“The Fed is facing a tough problem,” Kleinhenz said. “Its playbook for tightening of monetary policy can exert pressure on demand. It doesn’t have a direct ability, however, to influence the supply side by producing more gas, planting fields of needed crops or manufacturing microchips.”

NRF annual forecast predicts that retail sales for 2022 will increase between 6% and 8% to between $4.86 trillion and $4.95 trillion.