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Economic Forecasts

Core Inflation Picks Up

Kiplinger's latest forecast on inflation

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GDP 2.9% pace in '18, up from 2.3% in '17 More »
Jobs Unemployment rate will decline further More »
Interest rates 10-year T-notes at 3.3% by end '18 More »
Inflation 2.4% 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 $60 to $65 per barrel in October More »
Housing Price growth: 5.0% by end of '18 More »
Retail sales Growing 5.1% in '18 (excluding gas and autos) More »
Trade deficit Widening 5%-6% in '18 More »

Prices excluding food and energy, called the “core,” picked up to 2.4% in July, likely keeping the Federal Reserve on track to raise interest rates in September. The core rate will likely edge up again to 2.5% by the end of the year as tariffs boost the price of imports. The Fed should ignore prices boosted by tariffs, as these are not likely to get baked into the inflation rate, and continue with its quarterly rate-hike program. However, financial markets may be a little more nervous about rising prices.

Shelter costs will stay at today’s 3.4% rate, food will stay at 1.4%, all other commodities will remain unchanged from a year ago, and medical care services will pick up to 2.7% from 2.3% currently. Hospital costs are still rising strongly, but costs of physician visits and other medical services are seeing only modest increases, and the inflation rate for prescription drugs has been lower than expected. All other services will see a rise to 3.0% from July’s 2.8% rate.

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July’s total inflation rate was 2.9%. By the end of this year, it should be just 2.5%. July’s 12-month rate includes last fall’s surging gasoline prices. By this December, 2017’s jump will get excluded from the yearly growth rate, bringing the headline number down.

SEE ALSO: Print-Ready Consumer Price Index Chart

Source: Department of Labor, Inflation Data