A cut of beef is displayed at Handy Market on May 14, 2026 in Burbank, California.
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Recent inflation is likely to worsen over the next few months, according to a Friday survey from the country’s top economists.
Consumer price inflation is expected to reach 6% in the first quarter, according to the Survey of Professional Forecasters, a blue-ribbon group surveyed quarterly by the Federal Reserve Bank of Philadelphia.
In the most recent forecast three months ago, the panel put the expected consumer price index gain at 2.7%. However, that was before the US and Israel launched an offensive against Iran, a war that sent energy prices soaring while pushing inflation data past the Fed’s 2% target.
For the full year, the panel pegged the CPI rate at 3.5% for all items and 2.9% for context, excluding variable prices for food and energy. That’s up from the 2.6% average for both in the previous survey.
Higher levels of inflation are expected to continue in the third quarter, with headline CPI expected to be 3% and core to 2.9%. Both rates are expected to decrease by the end of the year, the fourth quarter to 2.5% and 2.7% respectively.
Still, the panel doesn’t see the Fed achieving its goal in the near future. The projected 10-year annual rate is at 2.4%, which the survey indicated would be equal to 2.22% for the Fed’s preferred rate, the consumer price index, a Commerce Department estimate.
PCE inflation rates are also expected to hold above the Fed’s comfort zone, though not as high as the consumer price index, compiled by the Bureau of Labor Statistics.
Headline PCE inflation is targeted at 4.5% in the second quarter with core at 3.4%, compared to earlier estimates of 2.7%.
The survey follows a flurry of inflation data showing that prices paid at both the consumer and wholesale levels reached multi-year highs in April. The headline CPI showed inflation at 3.8%, the highest in nearly three years, while the annual producer price inflation rate of 6% was the highest since December 2022.
All the details come as Kevin Warsh is set to take over the role of Fed chairman. Although Warsh has indicated that he would like to see interest rates lower, that will be difficult to achieve with inflation data so high and a general sentiment among his fellow policymakers to keep rates tight with an open mind about possible rate hikes if inflation worsens.
Elsewhere in the study, forecasters lowered their growth outlook for the future. They expect gross domestic product to rise by an average of 2.1% annually in the second quarter and 2.2% for the full year, down 0.3% from the previous estimate. Growth is expected to slow to 1.9% in 2027 before rebounding to more than 2% in subsequent years.
The unemployment rate this year is expected to drop to about 4.5%, or 0.2 percentage points above the current rate.
