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Economic Forecasts

Inflation Slowly Heads Higher

Kiplinger's latest forecast on inflation

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GDP 2.9% pace in '18, up from 2.3% in '17 More »
Jobs Slower job gains likely this year as labor market tightens More »
Interest rates 10-year T-notes at 3.3% by end '18 More »
Inflation 2.6% in '18, up from 2.1% in '17 More »
Business spending Up 7% in '18, boosted by expanded tax breaks More »
Energy Crude trading from $65 to $70 per barrel in July More »
Housing Price growth: 5.0% by end of '18 More »
Retail sales Growing 4.4% in '18 (excluding gas and autos) More »
Trade deficit Widening 5%-6% in '18 More »

A moderate hike in April prices of 0.2% is consistent with inflation rising this year to a 2.6% rate. That’s an increase from 2017’s 2.1% and reflects higher overall prices, particularly for gasoline. Cutbacks to Iranian and Venezuelan production of crude oil — right as the peak summer driving seasons starts — are boosting gas outlays. Housing costs will rise 3.5% this year, slightly more than last year’s 3.1%.

Costs for medical care will spike 2.7% this year after 2017’s unusually low 1.6% tick up. Prices for nonhousing services will jump 2.7%, compared to 1.8% last year. Finally, auto insurance rates are climbing substantially as fixing complex gadgets on newer vehicles gets more expensive.

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Not all prices will go up significantly, or at all, this year. Food will cost only 1.5% more. Prices of new motor vehicles will drop after accounting for quality improvements, because demand is waning. A glut of off-lease vehicles hitting the market is denting used-car and used-truck prices, as is the decline of post-hurricane replacement demand.

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Cheaper vehicles will help keep inflation in check. But the Federal Reserve will stick with its plan of gradual interest rate hikes in response to inflation’s overall march upward. (The Fed is expected to raise rates a quarter of a percentage point at least twice more this year, and then three to four times next year.)

SEE ALSO: Print-Ready Consumer Price Index Chart

Source: Department of Labor, Inflation Data