WASHINGTON, May 18 —
- Inflation Forecast: Consumer price inflation is projected to hit 6% in the second quarter, up from 2.7% in the prior survey.
- Full-Year CPI: Economists now expect headline inflation at 3.5% for 2026, compared with 2.6% previously.
- Core Inflation: Core CPI, excluding food and energy, is forecast at 2.9% for the full year.
- PCE Projection: Headline PCE inflation is expected to reach 4.5% in the second quarter, with core PCE at 3.4%.
- Economic Growth: U.S. GDP is projected to expand 2.2% in 2026, down 0.3 percentage points from earlier estimates.
- Unemployment Outlook: The unemployment rate is expected to average 4.5%, modestly above current levels.
| Metric | Previous Forecast | Updated Forecast |
|---|---|---|
| Q2 CPI Inflation | 2.7% | 6.0% |
| Full-Year CPI | 2.6% | 3.5% |
| Full-Year Core CPI | 2.6% | 2.9% |
| Q2 Headline PCE | 2.7% | 4.5% |
| Q2 Core PCE | N/A | 3.4% |
| 2026 GDP Growth | 2.5% | 2.2% |
| 2027 GDP Growth | N/A | 1.9% |
| Unemployment Rate | 4.3% | 4.5% |
| April CPI Inflation | N/A | 3.8% |
| Producer Price Inflation | N/A | 6.0% |
Inflation Pressures Expected to Intensify
U.S. inflation is expected to rise sharply in the coming months, according to the latest Survey of Professional Forecasters, a closely watched quarterly poll conducted by the Federal Reserve Bank of Philadelphia.
Economists surveyed now expect consumer price inflation (CPI) to reach 6% in the second quarter, more than doubling the 2.7% estimate issued just three months earlier.
The revised outlook follows recent data showing a renewed acceleration in consumer and wholesale prices, with higher energy costs emerging as a key contributor.
Energy Costs and Geopolitical Risks
The shift in expectations comes after heightened geopolitical tensions in the Middle East pushed oil and energy prices higher. Rising costs have increased concerns that inflation could remain elevated longer than policymakers previously expected.
Headline CPI inflation reached 3.8% in April, marking its highest level in nearly three years, while producer prices rose 6% annually, their strongest pace since late 2022.
Fed Faces Tough Rate Decision
The inflation outlook presents a challenge for the Federal Reserve, particularly as incoming Fed Chair Kevin Warsh has expressed interest in lower borrowing costs.
However, elevated inflation may limit the central bank’s ability to reduce interest rates, with policymakers expected to maintain a cautious stance and potentially consider further tightening if price pressures intensify.
Growth Outlook Softens
Forecasters also trimmed expectations for economic growth. U.S. gross domestic product is expected to expand at an annualized 2.1% pace in the second quarter and 2.2% for the full year.
Growth is projected to slow further to 1.9% in 2027 before stabilizing above 2% in later years, while unemployment is expected to edge higher.
