Inflation Rate Forecast

Economic Forecasts

Inflation to Ease Further to 1.8% by end 2020

Kiplinger’s latest forecast on inflation

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Expect the inflation rate to fall to 1.8% by the end of the year, down from last year’s 2.3%. The meltdown in oil prices will likely cause energy prices to end the year down 6%. But a coronavirus-induced slowdown in the U.S. economy should also curb many price increases, with a few important exceptions: Housing prices should jump as low mortgage rates cause demand for homes to surge in the face of low inventory. Also, a renewed preference for eating at home instead of eating out will boost the price of groceries 2.6%, a bit more than usual. Spending at restaurants will likely be hurt by both virus concerns and people feeling less wealthy because of stock market declines.

Core inflation, which excludes the costs of food and energy, will continue to run higher than the headline rate, at about 2.4%. Health insurance costs are the main reason behind the current lofty 5.3% medical services inflation rate, though the cost to employers of providing health benefits typically runs lower due to cost-saving measures. Employer costs are likely to be up 3.6% this year, to an average per-employee cost of about $12,000 for small employers and $14,000 for large employers. Small employers have been offering plans with deductibles that have risen faster than those at large employers.

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By year-end, shelter costs will have risen 3.5%, a tad above the 3.3% increase in 2019. The prices of all other commodities will be up 0.1%, similar to 2019’s slight increase. Other services will be 2.4% more expensive in 2020, up a bit from 2019’s 1.8% increase.

SEE ALSO: Print-Ready Consumer Price Index Chart

Source: Department of Labor, Inflation Data