Inflation Outlook 2026
Headline CPI, core inflation, PCE, and the inflation expectations embedded in markets.
Data as of · Outlook refreshed
Current State
Inflation is the variable that connects central bank policy, real yields, and asset valuations. Sticky components (shelter, services) matter more for policy than volatile components (food, energy).
Macro Regime Context
Our regime work carries the stagflation label on trajectory only, with reflation as the target, and inflation is the leg that moved it. Headline did the breaking: the 12-month rate fell 16.88% in a single month in its June reading. The core complex did not go along, with core CPI, core PCE, shelter and supercore all sitting at the tops of their 52-week ranges. For this page the regime call is a question of composition rather than level. A reflation transition built on energy pass-through would land on a core that never disinflated, which is why compensation near 2.3% is the pressure point rather than the headline.
Full regime analysis →Key Metrics
Core CPI, core PCE, shelter and supercore all print at their 52-week highs
Core CPI printed 336.789 in the July reading, the top of its 52-week range. At 130.658, core PCE is at its own high for the year, and so are shelter at 448.542 and supercore services at 445.616. Four sticky measures, four highs, all of them 61 days old.
Headline is the only part of the basket the arithmetic flatters. CPI (All Urban) rose 0.07% on the month to 332.813, still under the 333.979 it reached inside the year, and the not-seasonally-adjusted series slipped 0.01% to 333.918. Energy did that work. The energy component fell 1.48% on the month and 3.5% over 90 days, and at 314.553 it sits well below the 338.639 high of its range.
Strip energy out and nothing is slowing. Core CPI's 0.22% month runs above the 0.41% it managed across 90 days, so the pace picked up. At 0.25% against 0.75% for the quarter, core PCE is steady rather than cooling, shelter's 0.26% against 0.77% says the same, and supercore at 0.23% against 0.56% is the second line accelerating.
The goods offset is thinning as well. Used cars and trucks rose 0.4% on the month, the largest one-month gain of any CPI line here, off a level of 180.306 that is barely above the 179.591 floor of its year. Food, at 349.881, reached a 52-week high on a 0.08% move.
Why is the 5-year breakeven at 2.3% when core inflation sits at a 52-week high?
The 5-year breakeven closed at 2.3% on August 28, which makes it the freshest number on this page by a distance: three days old, against 61 for the CPI basket. Its range over the past year runs from 2.16 to 2.72, so 2.3% sits nearer the floor. The 10-year is at 2.31%. One basis point separates five years of priced inflation from ten.
That flatness is the tell. A market braced for sticky services would pay more for the longer horizon, and this one prices the two the same, both below the 2.47943444% the Cleveland Fed's model puts on five years. The measures are not the same object, since a breakeven carries a risk premium a model expectation does not, but the sign of the gap is what I am reading.
My view is that compensation is priced off the headline path, and the headline path has been held down by an energy component that fell 3.5% over 90 days. Our late-July regime work argued the same thing from the other side, that a large move in crude had not been paid for in inflation compensation. The global commodity index here is down 9.84% over 90 days, and its print is dated July 1, so it sits behind that crude leg rather than contradicting it.
The strongest case against me is staleness, and it is real. Whoever paid 2.3% on August 28 has seen releases that these July prints cannot reflect. If core came in soft twice, then 2.3% is informed and my 52-week highs are history.
Market and model expectations fell all quarter, then turned back up over 30 days
Five forward-looking measures sit in this table, and all five fell over 90 days and rose over the last 30. The 5-year breakeven is down 8.73% over the quarter and up 2.68% over the month. Its 10-year counterpart is down 2.94% and up 2.21%. Cleveland's model series do the same at every horizon: the 1-year down 32.29% over 90 days and up 0.32% over 30, the 2-year down 17.3% and up 1.35%, the 5-year down 4.48% and up 2.22%.
Notice which end of that curve is turning hardest. The 1-year has barely lifted off its collapse; the 5-year gained most of the three. Whatever repriced over the summer was long-horizon, and it moved the way core services have been moving.
Households are the exception, and the exception has to be handled carefully. Michigan inflation expectations came in at 4.2% in the July reading, down 8.7% on the month and 10.64% over 90 days from a 4.8% high, and still far above every market and model number here. That reading is 61 days old, so its month closes two months before the breakevens' does. It is not evidence about August, and the two series should not be described as moving together.
De-anchoring is what would make 2.3% wrong by a wide margin. The gauge that would show it is falling, and it is also the gauge nobody trades.
PPI and household expectations no longer carry the case. Core services do.
In July this page argued that PPI and household expectations were both at 52-week highs, and that the gap between realized inflation and market pricing would close upward through breakevens. Half of that has aged well.
PPI final demand's July print is 156.563, a shade under the 156.783 it touched inside the year, and it fell 0.03% on the month. Across 90 days it is up 0.31%, a pipeline that is warm rather than filling. Michigan has come off its high. Neither leg carries the weight it did then.
The breakeven leg paid on direction, and only on the shorter window: 10-year compensation is up 2.21% over 30 days and the 5-year up 2.68%, both still lower over 90.
What survives is the part that was always the strongest, and it is now the only part standing. Core services do not respond to crude. Shelter at 448.542 and supercore at 445.616 are at 52-week highs, up 0.77% and 0.56% over 90 days, and those two lines weigh more in the policy calculation than an energy component that has been holding the headline down. Two months of soft core prints would settle the argument against me, and nothing in this table shows them yet.
A market paying 2.3% for five years is betting on the components that have already cooled, and asking the ones that have not to cooperate.
Active Scenarios Affecting Inflation
What happens to markets when CPI inflation data comes in hotter than expected? Bond selloffs, Fed hawkishness, and portfolio positioning explained.
What happens when oil prices spike? Inflation fears, consumer squeeze, recession risk, and the complex impact on stocks, bonds, and the dollar.
What happens when US home prices crash? The wealth effect, banking stress, and cascading economic impacts of a housing downturn explained.
What happens when gold prices surge? The risk-off signal, inflation hedge demand, central bank buying, and portfolio implications explained.
What happens when long-term inflation expectations break above 3%? Fed credibility crisis, policy dilemma, and the risk of a 1970s-style wage-price spiral.
What happens when copper prices surge? Why "Dr. Copper" is the economy's best diagnostician, and what it means for equities, inflation, and global growth.
What does gold at $3,000 mean for the global economy? Analysis of what drives gold to record highs and the implications for currencies, bonds, equities, and inflation.
What happens when real interest rates turn negative? Financial repression, the war on savers, and how assets reprice when holding cash guarantees losing purchasing power.
Recent Analysis
The curve steepening that could not be decomposed in late July now has a source in the short end, and it arrived with crude higher, not lower.
Index vol travelled from 20.66 on July 29 to 15.99 on Friday. The long end went the other way, and crude added 3.16% to $84.67.
Brent marked $90.75 early Thursday. Ten-year inflation compensation closed Wednesday at 2.26%, two basis points above its June 30 level.
WTI at $74.86 and Brent at $79.65 were up nearly 5% with the New York session still open, while high yield spreads sit at 2.70, the tightest reading in the feed. June CPI lands on Tuesday.
WTI at 74.05 sits 3.95 below the gate that flips the oil view bullish. The disinflationary impulse the bond market leans on is eroding whether or not that gate is ever reached.
The Atlanta Fed's nowcast printed the same 1.3% it reset to in April, and Thursday's update, not Tuesday's CPI, is the number that settles the growth question.
The market's two long-duration trades are reading the same 10-basis-point rise in real yields and reaching opposite verdicts, four days before June CPI.
The 10-year looks unchanged over a month, but beneath it real yields are up 10 basis points, breakevens price a rapid disinflation that realized CPI has not delivered, and Tuesday's June inflation print decides which side folds.
The VIX sits near 16 while Bitcoin’s Fear and Greed Index reads 15. That gap is June’s rates shock showing up in the one asset built to feel it first.
Debt-to-GDP near 125%, deficits around 6%, and a 10-year real yield at 2.16%. This scenario does not arrive in a crash; it arrives one auction at a time.
What to Watch
- •Monthly CPI release (around the 10th-15th)
- •Core services ex-shelter trajectory
- •Shelter disinflation pace
- •5Y5Y breakeven and market-implied expectations
- •Wage growth and unit labor costs
Frequently Asked Questions
What is the inflation outlook for 2026?▾
Inflation is the variable that connects central bank policy, real yields, and asset valuations. Sticky components (shelter, services) matter more for policy than volatile components (food, energy). The live metrics on this page plus the active scenarios below show where the current environment sits on the distribution of possible paths. The outlook is continuously updated rather than locked in as a point forecast.
What should I watch to track inflation?▾
The core watch list for inflation includes: Monthly CPI release (around the 10th-15th); Core services ex-shelter trajectory; Shelter disinflation pace. The full list is on this page under "What to Watch." These signals are chosen because they are leading rather than coincident, and because they have historically flagged regime transitions before consensus catches up.
How does inflation fit into the broader macro regime?▾
Every Outlook Hub is anchored to the current Convex regime classification (Goldilocks, Reflation, Stagflation, or Deflation). The Macro Regime Context section on this page shows how inflation typically behaves in the current regime and what a regime change would imply for these metrics.
Which scenarios could change the inflation outlook?▾
The "Active Scenarios" section lists scenarios that most directly affect inflation conditions. Each scenario page includes a probability-weighted asset response, historical precedents, and live trigger metrics. Multiple active scenarios at once are the strongest signal that the outlook is about to shift.
How often is the Inflation Outlook refreshed?▾
The key metrics on this page pull live data and refresh within minutes of each release. The regime context and scenario probabilities update daily. The narrative itself is rewritten against the live data on a weekly rotation, with the date of the current version shown at the top of the page, and it is rebuilt sooner when the structural read on inflation changes materially.
Other Outlook Hubs
Get updates on inflation and related analysis delivered to your inbox.
Outlook hubs aggregate live data, scenarios, and analysis from the Convex research desk. They are educational and for informational purposes only. They do not constitute financial advice.