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Economic Forecasts

Inflation Will Inch Up

Kiplinger's latest forecast on inflation

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GDP 2.2% pace in '17, 2.6% in '18 More »
Jobs Hiring pace should slow to 175K/month by end '17 More »
Interest rates 10-year T-notes at 2.4% by end '17 More »
Inflation 2.1% in '18, up from 1.9% in '17 More »
Business spending Rising 3%-4% in '17, after flat '16 More »
Energy Crude trading from $50 to $55 per barrel in February More »
Housing Existing-home sales up 1.3% in '17 More »
Retail sales Growing 3.8% in '17 (excluding gas) More »
Trade deficit Widening 6% in '17, after nearly flat '16 More »

Inflation will rise slightly next year, in keeping with a gradually strengthening economy. Price inflation for housing, medical care and other services will bump up from low levels in 2017 to more typical gains in 2018, causing total inflation to rise from 1.9% to 2.1% next year. Housing costs will likely gain 3.5% in 2018, up from 3.2%; medical services prices will gain 2.8% in 2018, up from 1.9% in 2017; and prices of other services will rise 2.6% in 2018, up from 1.8%. Food, energy and other goods are likely to rise at a rate like 2017’s.

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Prices rose a modest 0.1% in October as gasoline prices retreated a bit. New-vehicle prices continued to drop, while used-car prices jumped — likely the result of hurricane-damaged cars being replaced. Prices of shelter are rising a bit faster, probably because low housing inventories are boosting home prices and rents. Price growth of medical care has picked up as well, as doctors’ offices raise their fees after an extended period of little change.

Despite low inflation, the Federal Reserve will keep boosting interest rates. The Fed is likely to raise rates by a quarter-point at its December meeting. The central bank sees inflation running close enough to its 2% target to gradually bump up interest rates to a more typical range, after keeping rates extraordinarily low after the Great Recession.

SEE ALSO: Print-Ready Consumer Price Index Chart

Source: Department of Labor, Inflation Data