Inflation Has Bottomed

2025-06-01 02:55:24 ET

Summary

• Leading indicators now signal rising inflation after a period of disinflation, reversing my earlier soft landing outlook.
• Recent PCE and core inflation data are near Fed targets, but upcoming tariffs and tough year-over-year comparisons will push rates higher.
• Goods inflation is set to increase as importers pass on new tariff costs, with sector-specific impacts likely.
• I expect both CPI and PCE to rise to 3-4% by year-end, making Fed rate cuts unlikely as inflation has bottomed.

I started to promote the soft landing narrative back in the summer of 2022 when the Consumer Price Index ((CPI)) was flirting with 9%, and the personal consumption expenditure ((PCE)) price index was over 7%. The same leading indicators I used back then to forecast the disinflationary period ahead are now pointing me in the opposite direction. On Friday, we came as close as I think we will to a soft landing for the economy. The personal consumption expenditure ((PCE)) price index rose just 0.1% in April and fell to 2.1% on an annualized basis....

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