Beef fillets are displayed at Handy Market on May 14, 2026 in Burbank, California.
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The recent spike in inflation is likely to worsen in the coming months, according to a Friday survey of the nation’s top economists.
Consumer price inflation is expected to reach 6% in the first quarter, according to the Professional Forecaster Survey, a Blue Ribbon organization conducted quarterly by the Philadelphia Fed.
In its latest forecast, three months ago, the committee pegged the expected increase in the consumer price index at just 2.7%. But that was just before the US and Israel launched an attack on Iran, and the hostilities sent energy prices soaring and inflation statistics well above the Fed’s 2% target.
For the full year, the committee estimated the CPI rate to be 3.5% for all items and 2.9% for the core, excluding volatile food and energy prices. This is up from both estimates of 2.6% in the previous survey.
The rise in inflation levels is expected to continue into the third quarter, with headline CPI expected to be 3% and core 2.9%. Both levels are expected to ease by the end of the year, to 2.5% and 2.7%, respectively, in the fourth quarter.
Still, the committee does not believe the Fed will meet its goals in the future. The 10-year average annual forecast is 2.4%, but the study notes that this would be equivalent to 2.22% based on the Commerce Department’s Personal Consumption Expenditures Price Index, which is the Fed’s recommended standard.
PCE inflation is also expected to remain well above the Fed’s comfort zone, although it will not be as high as the consumer price index compiled by the U.S. Department of Labor.
Headline PCE inflation is expected to be 4.5% in the second quarter, with core inflation expected to be 3.4%, compared to previous expectations of 2.7%.
The study is based on a wealth of inflation data showing that prices paid at both the consumer and wholesale levels reached multi-year highs in April. The headline CPI inflation rate was 3.8%, the highest level in about three years, and the annual producer price inflation rate of 6% was the highest since December 2022.
All of this data comes as Kevin Warsh is scheduled to take over as Federal Reserve Chairman. Governor Warsh seems to want to lower interest rates, but that will be difficult to achieve given the very high inflation numbers and the general sentiment among his policymakers to keep rates on hold with a positive view of the possibility of raising rates if inflation worsens.
Elsewhere in the survey, forecasters also lowered their growth outlook for the coming quarters. Gross domestic product is expected to grow at an annual rate of 2.1% in the second quarter and 2.2% for the full year, the latter being 0.3 percentage points lower than previously forecast. Growth is expected to slow further to 1.9% in 2027, before recovering to above 2% in the following years.
The unemployment rate is expected to settle at around 4.5% this year, 0.2 percentage points higher than current levels.
