Headline inflation is projected to rise above 4%, driven by increasing energy
prices and higher portfolio management fees. The year-over-year headline PCE
inflation is estimated to reach 4.1%, the highest since April 2023, while core
PCE inflation is expected to climb to 3.4%.
Looking ahead, persistent high costs in fertilizers and transportation,
influenced by geopolitical tensions, will likely elevate food prices.
Additionally, a shortage of computer memory chips will keep core goods inflation
elevated amid ongoing demand for AI infrastructure.
Despite these pressures, the Federal Reserve may consider a rate cut due to
disinflationary trends in services and a stable labour market. The forecast
indicates that inflation will remain elevated throughout the year, with core PCE
expected to outpace core CPI due to differing weights in the indices.
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