2021 Inflation Forecast Heads Higher
Supply-side pressures are behind our increase for this year.
We’ve increased our 2021 inflation forecast for the Personal Consumption Expenditures Price Index to 2.9% from 2.3% previously. We expect 2021 core inflation of 2.5%. For 2022-25, our forecast is essentially unchanged; we expect moderate core inflation averaging 2.3%, just above the Federal Reserve’s 2% long-run target.
The Consumer Price Index jumped 0.8% in April, following a large 0.6% increase in March. Core inflation increased even faster in April, up 0.9%. In fact, the CPI has made up for its pandemic losses and is now running ahead of its prepandemic trend of 1.9% annual growth.