The good news is that inflation, now at 7.1%, has likely peaked. The bad news: it’s going to remain high for the foreseeable future.

That’s the assessment of David Mann, chief economist for Asia-Pacific, Middle East and Africa at the Mastercard Economics Institute, speaking on CNBC’s Squawk Box Asia.

It will take a few years for inflation to come back down to the government’s preferred 2% annual rate, CNBC reports.

“Inflation has seen its peak this year, but it will still be above what we had been used to pre-pandemic, next year,” Mann says. “Inflation has become that big challenge. It’s been spiking and staying very high.”

The Federal Reserve raised interest rates by 425 basis points, or 4.25 percentage points, in 2022.

A danger would be for the Fed to raise interest rates too high, Mann adds: “The challenge is if you’ve lost orientation of where the sky and the ground is, you’re not quite sure where you need to end up.”

The Fed and other central banks could create a “serious scenario” if they “end up going slightly too far and then need to reverse relatively quicky,” Mann says.

Nevertheless, as shown by Mastercard’s report Monday that holiday spending is up 7.6% this year, Mann is optimistic that coming out of the 2-1/2-year pandemic, consumers will continue to spend on services and experiences, as opposed to goods.

Travel demand is strong, he notes. Consumers are being frugal about spending on necessities so that they have enough money to afford non-essentials, the economist says.

To some extent, people are living for today: “There is something in the back of people’s minds that worries them that even though it’s not very likely, it’s still possible that those [COVID] restrictions [will] come back.”