Inflation Rate Forecast

Economic Forecasts

Inflation Eases, but Health Insurance Costs Still Surging

Kiplinger’s latest forecast on inflation

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The overall inflation rate dropped in September to 1.7% because of another fall in energy prices. However, further drops are unlikely, so headline inflation in future months ought to stabilize at around 2.1%.

Core inflation, which excludes the costs of food and energy, will continue to run higher, at about 2.5%. An 18.8% surge in health insurance costs is supporting the higher core rate. It is almost entirely responsible for the jump in medical services inflation to a 4.7% rate, which is considerably faster than last year’s modest 2.7% rise. Price increases for physicians’ services and prescription drugs, by contrast, have been modest.

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By year’s end, shelter costs will have risen 3.4%, up a tad from the 3.2% increase in 2018. Food prices will be 1.4% higher, though recent increases have been minimal because China has not yet increased its buying of agricultural products from the United States. Prices could pick up a bit if the United States accepts China’s compromise offer to buy more ag goods.

The prices of all other commodities will be 0.9% higher, on average — a pickup from 2018’s 0.3% gain because of tariffs. Other services will be 1.7% more expensive in 2019, down from last year’s 2.4% increase.

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Lower overall inflation will enable the Federal Reserve to cut interest rates again on October 30.

SEE ALSO: Print-Ready Consumer Price Index Chart

Source: Department of Labor, Inflation Data