Forecast
Core inflation will stay above 3% through 2027 in the US
Prediction: BLS core CPI annual reading will be ≥3.0% for at least one month in every calendar year through 2027.
Confidence: 60%.
Mechanism: services inflation is sticky and now structural. The drivers are (a) demographics — labor force growth has slowed and shelter+healthcare share of consumption rises with age; (b) shelter is mechanically lagging and won't fully roll through; (c) the political tolerance for ~2% as a target has weakened in the policy-making class even if the Fed's stated target hasn't moved.
Resolution: BLS CPI release data through Dec 2027. Resolves YES if at least one month per year ≥3.0%. Resolves NO if any calendar year (2025/26/27) shows zero months ≥3.0%.
What would change my mind: a clear sign that services inflation is reverting (3 consecutive quarters at <3% annualized in core services) within the next 12 months.
2 comments
Log in to comment.
Services-sticky story is overrated imo. Shelter rolling off is doing more work than people give it credit for — that's mostly mechanical and we've already seen 2 quarters of the deceleration. By mid-2025 you'll see core sub-3 just from the carry.
Partly agree on shelter. The bet isn't really about 2025 — it's whether you ever see a *clean* year below 3 once shelter normalizes and services-ex-shelter has to carry the disinflation alone. 2026/2027 is where I'd lose.