Inflation has moderated from its pandemic-era peaks, but top economists warn that multiple, deep-rooted forces will keep price growth elevated for years. Understanding why inflation won’t simply vanish can empower consumers, businesses, and policymakers to adapt and respond effectively.

Current inflation landscape: data and forecasts

As of May 2025, headline Consumer Price Index (CPI) inflation in the U.S. stood at 2.4%, while core CPI (excluding food and energy) reached 2.8%. The Fed’s preferred gauge, the Personal Consumption Expenditures (PCE) deflator, measured 2.1%—still above the 2% target.

Leading research firms and institutions forecast that inflation will stay above target well into the future:

• Morgan Stanley predicts CPI will rise to 2.5% in 2025, up from prior estimates.
• Deloitte sees average CPI growth of 2.9% next year, accelerating to 3.2% in 2026 before easing to 2.3% by 2029.
• Core PCE inflation could hit 3% if current tariffs remain in place, compared with a 2.1% figure without tariff pressures.

Persistent drivers fueling price rises

Economists identify several structural and policy-driven factors that make inflation sticky housing and services inflation resistant to swift declines. These forces include:

• Tariffs and policy shifts: New U.S. tariffs on major trading partners have inflated import costs, feeding through into consumer and business prices. Analysts at Goldman Sachs and Morgan Stanley attribute a sizable reacceleration to these measures.
• Sticky categories—housing & services: Shelter costs and service-sector prices tend to adjust slowly. Lagged rent data in CPI indices suggest that elevated housing inflation will persist in the short term.
• Wage-price spiral: Inflation expectations remain elevated—4.3% according to the New York Fed’s latest survey. As workers demand higher pay to match rising costs, employers may raise prices further, entrenching a wage-price spiral.
• Supply-side shocks & structural changes: Ongoing labor shortages, climate-related disruptions, and structural supply-chain vulnerabilities continue to exert upward pressure on costs, especially for food and essential goods.

Economic and social impacts

Persistent inflation affects households unevenly. A recent survey found that 77% of Americans feel their incomes are not keeping pace with rising prices, particularly for food, shelter, and health care.

Basic necessities such as eggs, dairy, and rent remain sources of acute stress. Lower-income families often spend a larger share of their budgets on these staples, amplifying the social and political consequences of sustained inflationary pressure.

Policy responses and their limits

The Federal Reserve’s primary tool against inflation is interest-rate hikes, aimed at cooling demand. While rate increases since 2022 helped bring headline inflation down from 9.1% to around 3%, the pace of disinflation has slowed.

Raising borrowing costs helps temper consumer spending and investment, but can also hinder economic growth and risk recession. Many economists caution that monetary policy alone cannot address deep structural issues such as housing shortages or resilient service-sector price gains.

As one senior economist put it, controlling inflation hinges on too much growth in the money supply and the credibility of central banks’ commitments. However, excessive tightening carries political and financial stability risks.

Long-term outlook and concluding thoughts

Global forecasts reflect a broad consensus: 94% of chief economists expect inflation to exceed previous targets in 2025, not only in the U.S. but around the world. Rising public debt, fueled by pandemic-era spending and stimulus, may limit future fiscal flexibility.

Most analysts agree that structural issues—housing supply constraints, demographic shifts, and climate-adaptation costs—will slow the return to 2% inflation. Yet some disinflation is in the pipeline as goods and energy prices cool, and as delayed housing cost adjustments surface in official data.

Renowned economists emphasize that policy credibility and the management of expectations are as critical as rate decisions. Restoring confidence in low-inflation stability will require coordinated fiscal measures, targeted structural reforms, and transparent communication.

In this evolving landscape, households and businesses can prepare by adopting inflation-aware strategies: indexing contracts, diversifying supply chains, and prioritizing savings. Policymakers must also balance short-term stabilization with long-term investments in housing, infrastructure, and labor force development.

Ultimately, inflation’s persistence reminds us that price stability is not guaranteed—it demands constant vigilance, adaptive policies, and an informed public ready to engage with complex economic realities.