Will Inflation Keep Rising? Expert Predictions for 2025

As we navigate through 2025, inflation has become a pressing concern for millions of Americans struggling to manage the rising cost of everyday essentials, from groceries and gas to housing and healthcare. With prices increasing across multiple sectors, households are adjusting budgets, delaying purchases, and reconsidering long-term financial plans. Economists and policymakers are closely monitoring the situation, providing forecasts that range from cautious optimism to warnings about renewed upward pressure. Factors such as ongoing tariff impacts, labor market shortages, supply chain disruptions, and persistent service-sector costs make the outlook complicated. Understanding these predictions is critical for consumers, investors, and businesses aiming to make informed decisions in an uncertain economic landscape. This article explores expert projections for U.S. inflation in 2025, evaluates potential risks, and highlights how evolving economic conditions may affect daily life and long-term financial planning.

Will Inflation Keep Rising? Expert Predictions for 2025

Federal Reserve Signals Gradual Moderation

Federal Reserve officials, including Governor Christopher Waller, have indicated that inflation is expected to moderate in the coming months, with the possibility of returning toward the Fed’s long-term 2% target if no major economic shocks occur. St. Louis Fed President Alberto Musalem also projects a gradual easing of inflation, estimating a convergence toward target levels by the second half of 2026, while noting that core inflation remains stubbornly above ideal levels. The Fed’s cautious approach emphasizes the use of interest rate adjustments and monetary policy tools to prevent sudden spikes while maintaining economic stability. For consumers, this suggests potential relief in price increases over time, though moderation may be slow and uneven across sectors.

Tariff-Related Pressures and Short-Term Spikes

Despite these projections, some forecasters, including RBC analysts, warn of short-term inflationary spikes during the latter half of 2025, largely driven by tariffs and import-related costs. Both headline and core Consumer Price Index (CPI) measures could exceed 3% year-end as businesses gradually pass these costs to consumers. Similarly, Investopedia forecasts suggest core Personal Consumption Expenditures (PCE) inflation could surge to around 4.3% in Q4, depending on the extent to which international trade costs affect domestic prices. This indicates that, for certain goods and services—particularly imports—consumers may experience noticeable price increases even as broader trends show gradual moderation.

Elevated Core Inflation Expected

Core inflation, which excludes volatile food and energy prices, is projected to remain elevated through much of 2025. Barrons cites economists anticipating core PCE inflation to peak near 3.4% in Q3 before tapering slightly in subsequent months. J.P. Morgan projections align with this, suggesting global core inflation may stay around 3.4% annualized in the second half of the year. Persistent wage growth, service-sector price pressures, and regional cost variations contribute to this continued elevation. Households may notice that rent, healthcare, and other essential services continue to rise, even if commodity prices stabilize temporarily.

Labor Market Constraints Amplify Price Pressures

Federal Reserve Beige Book insights highlight that labor shortages and tight hiring conditions are contributing to ongoing price pressures. Businesses facing higher wages and limited staffing options may pass these costs to consumers through higher prices for goods and services. Cleveland Fed economist Beth Hammack emphasizes that tariff-induced cost increases could push overall inflation toward 3%, particularly in industries reliant on imported components. These combined pressures suggest that, while some categories may see moderate increases, others could experience sharper price growth.

Potential Stagflation Scenarios

Economists warn that labor constraints and restrictive immigration policies could elevate inflation further in early 2026, creating conditions similar to stagflation—a combination of high inflation and slower economic growth. Moody’s chief economist Mark Zandi projects inflation could rise to approximately 4% if labor shortages persist. Apollo chief economist Torsten Sløk similarly anticipates inflation reaching around 3% by year-end as service-sector costs accumulate. Stagflation poses challenges for households and businesses alike, as rising costs coincide with slower wage growth and reduced purchasing power, affecting discretionary spending and investment decisions.

Broader Economic Forecasts

Recent surveys, including FT-Chicago Booth studies, project core PCE inflation increasing to roughly 2.8% by the end of 2025, while U.S. GDP growth expectations decline from 2.3% to 1.6%. These trends indicate that the Federal Reserve faces a complex balancing act: maintaining price stability while supporting sustainable economic growth. Investors and consumers should consider these factors when making decisions about borrowing, saving, or investing, as even moderate inflation increases can compound across various sectors, affecting household budgets and long-term financial plans.

Balanced Outlook with Persistent Risks

Overall, most experts suggest that inflation will likely remain above the Fed’s 2% target for much of 2025, with a probable peak between Q3 and Q4, followed by gradual easing. Despite signals from some Fed officials about potential interest rate adjustments, risks remain, including persistent service-sector inflation, tariff impacts, and labor market constraints. Consumers can benefit from understanding these dynamics, enabling more informed financial planning and proactive adjustments to budgets, investments, and lifestyle choices as the economic landscape continues to evolve.