Inflation to Stabilize at 2.2% in 2020

• GDP
• Unemployment
• Interest Rates
• Inflation
• Business Spending
• Energy
• Housing
• Retail Sales
• Trade Deficit

The inflation rate is likely to run about 2.2% through 2020, after a 2.3% pickup at the end of 2019. Expectations are that modestly slower economic growth in 2020 will prevent inflation pressures from accelerating. Swings in energy costs tend to be responsible for large changes in the inflation rate, but that shouldn’t be a factor this year. Energy prices are expected to tick up a little, but not too much.

Core inflation, which excludes the costs of food and energy, will continue to run higher than the headline rate, at about 2.3%. Health insurance costs are the main reason behind the high 5.1% medical services inflation rate, though the employer benefit cost typically runs at a lower rate because of cost-savings measures. Employer costs are likely to be up 3.6% this year, to an average per-employee rate of about $12,600 for small employers and $14,000 for large employers. Small employers have been offering plans with deductibles that have risen faster than those at large employers.

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By year’s end, shelter costs will have risen 3%, a tad below the 3.3% increase in 2019. Food prices will be 1.9% higher, picking up a bit in anticipation of China’s buying more U.S. agricultural goods. The prices of all other commodities will be 0.1% higher, about the same as 2019’s increase. Other services will be 2.4% more expensive in 2020, up a bit from 2019’s 1.8% increase.

With inflation close to 2% and stable, the Federal Reserve is not likely to change interest rates again for a while. Easing wage growth should also keep a lid on upward price pressures.

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Source: Department of Labor, Inflation Data