Fed Raises Inflation Forecasts Amid Strong Labor Market
The US Federal Reserve has raised its inflation forecasts for 2026 while lowering unemployment projections. The median forecast for core personal consumption expenditures (PCE) inflation was increased to 3.4% for 2026 from 3.3% in June.
The Fed's latest Summary of Economic Projections showed that the core measure, which excludes volatile food and energy prices, is expected to ease to 2.5% in 2027, 2.2% in 2028, and 2% in 2029.
Headline PCE inflation forecast for 2026 was also lifted by 0.1 percentage point to 3.7%. Inflation is projected to fall to 2.3% in 2027, 2.1% in 2028, and reach the Fed's 2% target in 2029.
The upward revisions came despite upcoming methodological changes by the US Bureau of Economic Analysis that economists expect to mechanically lower measured core PCE inflation.