Inflation Projected to Hit 6% in Q2 2026 as Energy Crisis Persists
Top economic forecasters now expect consumer price inflation to surge to 6% in the second quarter, a dramatic jump from 2.7% in the previous survey. The spike is driven by the ongoing Iran war's impact on oil prices and broader supply-chain disruptions.
Inflation Forecast Surges Sharply
The recent surge in inflation is likely to get worse over the next several months, according to a survey Friday from the nation's top economists, with consumer price inflation projected to hit 6% for the first quarter, compared with 2.7% in the prior survey. The survey follows a slew of inflation data showing that prices paid both at the consumer and wholesale levels hit multiyear highs in April.
Energy Crisis Fuels Price Pressures
Energy prices have been soaring since the fighting began in late February, accounting for more than 40% of a gain in the consumer price index that sent the headline inflation level to its highest in nearly three years. If, in the coming months, inflation rises further due to the conflict in the Middle East or due to other reasons, it will likely mean a loss of purchasing power for US households, which, in turn, could contribute to slower economic growth.
Fed Policy at a Crossroads
Following a week of surprisingly high inflation readings, traders in the fed funds futures market are pricing in an interest rate increase as soon as December, with a much higher certainty into the early part of 2027. A December hike has a nearly 51% probability, while a move higher by January carries about a 60% probability with March coming in at better than 71%.