Inflation Rate Forecast

Economic Forecasts

Health Insurance and Hospital Costs Kicking Up Inflation

Kiplinger’s latest forecast on inflation

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Energy prices rebounded in October, bringing the overall inflation rate to 1.8%. While energy costs appear to be stabilizing, the inflation rate is likely to end the year at 2.1%, and then stabilize at around 2% through 2020.

Core inflation, which excludes the costs of food and energy, will continue to run higher, at about 2.4%. A 20.1% surge in health insurance costs is supporting the higher core rate, along with a 3.5% increase in hospital costs. These two components are almost entirely responsible for the jump in medical-services inflation to a 5.1% rate, which is considerably faster than last year’s modest 2.7% rise. Cost hikes for physicians’ services and prescription drugs, by contrast, have been modest.

See Also: All Our Economic Outlooks

By year’s end, shelter costs will have risen 3.3%, up a tad from the 3.2% increase in 2018. Food prices will be 1.6% higher, picking up a bit after China agreed to purchase more U.S. agricultural items. The prices of all other commodities will be 0.2% higher, about the same as 2018’s increase. Other services will be 1.8% more expensive in 2019, off from 2018’s 2.4% increase.

With inflation close to 2% and a stabilizing economy, the Federal Reserve is not likely to cut interest rates again for a while. Some economists and investors had thought the Fed might cut rates further to boost inflation, but the Fed seems to be paying more attention to how economic growth is doing.

SEE ALSO: Print-Ready Consumer Price Index Chart

Source: Department of Labor, Inflation Data