UOB projects US inflation to average 3.5% headline and 2.8% core in 2026, delaying Fed rate cuts until 2027.
UOB analysts expect the Federal Reserve to maintain current interest rates through 2026, citing persistent inflation above the 2% target. Headline and core CPI are projected to average 3.5% and 2.8%, respectively, in 2026, with gradual rate cuts beginning in 2027.
Inflation has eased but remains elevated, with July CPI data reducing immediate concerns about persistently high prices. However, risks tied to energy prices and geopolitical tensions could disrupt the disinflationary trend, keeping inflation volatile.
The Fed’s extended pause reflects a cautious approach, balancing softer domestic demand against external shocks. Rate cuts are unlikely before 2027 unless inflation moderates further or energy prices stabilize.