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Economic Forecasts

Moderate Inflation in 2019

Kiplinger's latest forecast on inflation

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GDP 2.5% growth in '19, down from 2.9% in '18 More »
Jobs Unemployment rate will decline to 3.4% by end '19 More »
Interest rates 10-year T-notes at 3.0% by end ’19 More »
Inflation 2.2% in ’19, up from 1.9% in ’18 More »
Business spending Up 5% in ’19 as global growth slows More »
Energy Crude trading from $55 to $60 per barrel in June More »
Housing 5.35 million existing-home sales in ’19, down 0.4% More »
Retail sales Growing 4% in ’19 (excluding gas and autos) More »
Trade deficit Widening 7%-8% in ’19 More »

The inflation rate for 2019 will be 2.2%, up a bit from 1.9% at the end of 2018. Falling gasoline prices last year pushed the inflation rate down, but these prices are likely to end 2019 higher. Other factors raising prices faster include tariffs and higher worker wages, which will boost price increases for medical and other services. Hikes in housing costs will be slightly more subdued this year.

January prices were unchanged, on average, as gasoline prices dropped for the third straight month. However, core inflation — all prices except food and energy — stayed at a 2.2% yearly rate. This rate will likely edge up to 2.3% by the end of 2019, as the economic expansion generates small inflationary pressures.

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Shelter costs will end 2019 up 3%, down slightly from the 3.1% rise in 2018. Food prices will stay around 1.6%; they could pick up more if trade tensions with China are resolved and exports perk up. Prices of all other commodities will rise a modest amount this year. The cost of medical care services will build to 3.0%, from 2.4% in 2018. Physicians’ services and prescription drug prices have been lower than expected for a while, but should start gaining. Hospital visits will keep getting more expensive at a rate faster than overall inflation. Other services will be 2.3% more expensive in 2019, about the same as 2018’s 2.4% rate.

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The Federal Reserve won’t have to worry about inflation this year, but will keep a wary eye on the effect of faster wage growth. The Fed will be more likely to raise interest rates further if it sees businesses able to pass along wage increases, especially in the service sector.

SEE ALSO: Print-Ready Consumer Price Index Chart

Source: Department of Labor, Inflation Data