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Economic Forecasts

Moderate Inflation Returns

Kiplinger's latest forecast on inflation


GDP 3.0% pace in '18, up from 2.3% in '17 More »
Jobs Big job gains will continue, but reflect a strong economy 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 $55 to $60 per barrel in April More »
Housing Existing-home sales up 1.6%, new-home sales up 9.8% in '18 More »
Retail sales Growing 4.7% in '18 (excluding gas) More »
Trade deficit Widening 5%-6% in '18 More »

February’s prices rose a very moderate 0.2%, indicating the January price surge was a one-time event caused by cold weather in the Southeast and other factors. The return of more-moderate inflation means that the Federal Reserve can stick with its plan of gradual interest rate hikes. (The Fed is expected to raise rates a quarter of a percentage point on March 21, and again in June and December.)

Apparel prices rose for the second month as prices return to normal from deep holiday discounts. Prices of used cars and trucks declined for the first time in four months, indicating that post-hurricane replacement demand has abated. New-car leases have become more expensive as more customers forgo buying to drive expensive SUVs. Finally, auto insurance rates are climbing substantially as the industry responds to higher costs for repairing expensive gadgets on newer vehicles.

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Inflation will be 2.6% in 2018, compared with 2017’s 2.1% — reflecting more expensive gasoline and overall higher prices. Expensive gas, driven by higher crude oil prices, will account for most of 2018’s inflation boost. But other goods and services will cost more, too.


Prices for everything except food and energy will grow 2.4%, compared with 2017’s 1.7%. Housing prices will likely increase 3.1% in 2018, about the same as 2017’s increase. Medical care will go up 2.5% versus 1.6% in 2017. All other services will cost 3.3% more, compared with 1.8%. Food prices will likely increase 1.4%, close to last year’s 1.6%.

SEE ALSO: Print-Ready Consumer Price Index Chart

Source: Department of Labor, Inflation Data