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Economic Forecasts

Inflation Will Pick Up Next Year

GDP 1.4% growth for the year; a 2% pace in '17 More »
Jobs Hiring slowing to 150K-200K/month by end '16 More »
Interest rates 10-year T-notes at 1.4% by end '16 More »
Inflation 1.5% for '16, 2.5% in '17 More »
Business spending Flat in '16, after drop in '15 More »
Energy Crude oil trading from $40 to $45 per barrel in Sept. More »
Housing Prices up 5% on average in major metro areas More »
Retail sales 4% growth in '16, compared with 4.8% in '15 (excluding gas) More »
Trade deficit Widening 4% in '16, after a 6.2% increase in '15 More »

Consumer price inflation will rise to 2.5% by December 2017, from 1.5% at the end of this year. Almost all of the upturn will be the result of small increases in energy prices next year, after declines this year.

See Also: All Our Economic Outlooks

Core inflation, which excludes the especially volatile categories of food and energy, will rise about 2.4% in 2017, slightly above the 2.3% pace expected for this year. Medical care prices will rise at a 4.4% rate in both 2016 and 2017, up from 2.9% in 2015. Premiums for health insurance will rise at a 6% to 7% rate as insurance companies reevaluate their costs of participating in Obamacare. Prices for shelter will rise 3.7% in 2017, up from 3.5% in 2016.

The small but steady upward trend in the core inflation rate will likely help spur the Federal Reserve to raise interest rates a quarter of a percentage point a couple of times next year.


Expect food prices to rise only modestly in 2017, a tad more than 2016’s rise of 0.2%. Prices for meat, eggs and milk are trending down because production has ramped up, now that viruses that threatened livestock have run their course. Moreover, drought conditions have eased and the relatively strong value of the U.S. dollar versus other key currencies continues to hold down the costs of imported food.

We expect gasoline and other energy prices to stabilize at current levels for the rest of this year. Next year, though, they should begin to creep upward.

Stiff price competition globally will keep prices of commodities and goods fairly flat overall in coming months. However, prices for services will rise more than 3% this year. A greater scarcity of homes for sale in most metro housing markets should keep rents growing at a fast clip — 4% to 5%.

SEE ALSO: Print-Ready Consumer Price Index Chart

Source: Department of Labor, Inflation Data

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