US Inflation Outlook 2026 – Higher for longer
Inflation remains a challenge, driven by AI demand and energy costs. Discover how these factors are shaping economic forecasts and interest rates.
Inflation is expected to remain elevated, with core inflation projected around 3% year-on-year in 2026. Factors such as the AI buildout and energy supply shocks are contributing to this persistent inflationary pressure.
The AI infrastructure is driving up prices for information processing equipment, with a notable surge of 40% in Q1. While this increase is unsustainable, it highlights the ongoing impact of AI-related demand on core inflation. Additionally, the pass-through of energy costs and tariff effects are anticipated to keep core prices elevated, despite some signs of fading tariff-induced inflation.
As we adjust our forecasts, the Federal Reserve may delay interest rate cuts until later in the year, reflecting the complexities of the current economic landscape. The interplay of AI demand, energy costs, and tariff influences suggests that achieving the central bank’s inflation target may be more challenging than previously expected.
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