US inflation is proving sticky. Core PCE — the Federal Reserve's preferred gauge — is expected to peak around 3.3% year-on-year in the second quarter of 2026.
A slow descent
From there, forecasters see inflation easing gradually toward the Fed's 2% target by late 2027. Headline PCE inflation is projected to slow only modestly, from 2.8% in 2025 to about 2.7% in 2026, kept elevated in part by higher energy prices.
Implications
Persistent inflation complicates the Fed's job, keeping rate cuts off the table for now and reinforcing a cautious stance as policymakers wait for clearer signs of cooling.
Sources: CBO, U.S. Bank.