The Federal Reserve Bank of Philadelphia's top forecasters move slowly. They've been polled every quarter since 1968. They don't double their numbers in 90 days.
Until now.
Three months ago, the panel's CPI forecast was 2.7%. Today, the same group expects 6% this quarter. Same survey, same economists, more than double the forecast in 90 days.
The Survey of Professional Forecasters is the Philadelphia Fed's quarterly poll of the country's top economic forecasters. When the panel revises its outlook, it tends to be a gradual shift.
The panel's CPI forecast jumped from 2.7% in February to 6% for this quarter. CPI is the main measure of how fast prices are rising for shoppers.
Between the last survey and this one, the U.S. and Israel launched attacks on Iran. Crude oil now sits above $100 a barrel. Import costs are running at a 4.2% annual pace, the steepest in over three years.
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The panel sees inflation easing later in the year, but not back to target.
Headline CPI is projected at 3% in the third quarter, then 2.5% by year-end. Core CPI, which strips out food and energy, is expected at 2.9% in Q3 and 2.7% in Q4.
For the full year, the panel sees CPI at 3.5%. That's up from 2.6% three months ago.
The Fed's target is 2%, and none of those numbers come close.
That's the problem facing new Fed Chair Kevin Warsh. He's said he wants lower rates, but cutting into inflation this hot is hard to defend.
Most policymakers around him want rates held steady. They're keeping the door open to hikes if inflation keeps running.
The panel also lowered its forecast for growth. GDP is now expected to expand 2.2% this year, down 0.3 points from the prior estimate. Growth is set to slow to 1.9% in 2027 before climbing back above 2%.
Unemployment is set to settle around 4.5% by the end of the year. That's about 0.2 points above today's level.
Higher prices. Slower growth. Slightly higher unemployment. That's the shape of the next few quarters according to the country's top forecasters.
The panel's 10-year average for CPI still sits at 2.4%. By the Fed's preferred gauge, the PCE price index, that lines up at 2.22%. Both numbers are above the Fed's 2% target. Inflation is expected to stay above target for years, not months.
For investors, the takeaway is simple. The Fed has less room to cut rates than the market wants. And the soft landing scenario keeps getting harder to defend.
Watch the next CPI report carefully. If it runs as hot as forecasters expect, every asset tied to rates will move with it. Bonds, mortgages and growth stocks will all feel it first.
If you want to know what data prints like this mean for your portfolio, Market Briefs walks investors through it in five minutes every weekday - and a free investing course is thrown in as a bonus.
