Inflation rate projected to hit 6% in the second quarter, top economic forecasters say

• Full-year 2026 CPI inflation is now projected at 3.5% headline and 2.9% core, up from prior estimates of 2.6% for both measures
• April inflation data showed headline CPI at the highest level in nearly three years, with a 6% reading marking the peak since December 2022
• Economic growth forecasts were lowered to 2.2% for 2026 (down 0.3 percentage points), with unemployment expected to settle around 4.5%

Summary: Inflation Projections Surge to 6% in Q2 2026

The Federal Reserve Bank of Philadelphia's Survey of Professional Forecasters projects consumer price inflation will hit 6% in Q2 2026, a dramatic increase from the 2.7% forecast three months earlier. This sharp revision follows escalating tensions with Iran that have disrupted markets and pushed inflation well above the Fed's 2% target.

Key Projections:

• Q2 CPI: 6% (headline), up from 2.7% prior estimate
• Full-year 2026 CPI: 3.5% (headline), 2.9% (core)
• Q3 CPI: 3% (headline), 2.9% (core)
• Q4 CPI: 2.5% (headline), 2.7% (core)
• Personal Consumption Expenditures (PCE) inflation: 4.5% (headline) and 3.4% (core) for Q2, versus prior 2.7% estimates
• 10-year average inflation: 2.4% CPI (equivalent to 2.22% PCE)

Additional Economic Indicators:

Recent April data showed headline CPI at multi-year highs with wholesale inflation reaching 6%, the highest since December 2022. GDP growth expectations were lowered to 2.1% (Q2) and 2.2% (full year 2026), down 0.3 percentage points. Growth is projected to slow further to 1.9% in 2027. Unemployment is expected to reach 4.5%, up 0.2 percentage points from current levels.

Market Implications:

The elevated inflation data complicates the Federal Reserve's monetary policy path under new Fed chair consideration. While there is interest in lower rates, persistent high inflation may force policymakers to maintain steady rates or even consider hikes. The forecasters don't expect the Fed to reach its 2% inflation target for years, with projections remaining above target through the decade.