Summary

• Both overall and core PCE inflation stood at 2.5% year over year as of June, by our estimates.


• We project overall PCE inflation to average 2.4% in 2024 and 1.8% over 2025 to 2028—just below the Fed’s 2% target.


• Supply chain improvements have yet to be fully reflected in inflation numbers.


• Housing inflation should also start to fall.


• The coming deceleration in GDP growth should also cool off prices across the economy.

When peak inflation was raging in 2022, many economists thought that it would take a recession (perhaps a severe one) to bring inflation back to the Fed’s 2% target.

But the US economy has defied those pessimistic predictions. Inflation fell from 6.5% in 2022 to 3.7% in 2023, despite economic growth accelerating. We project inflation to continue to fall, averaging 2.4% in 2024 and then averaging just 1.8% over 2025 to 2028.

In terms of the exact timing, we expect core PCE to hit 2.0% year over year sometime in the first quarter of 2025.

READ MORE