Trump Faces 3.7% Inflation Surge as Tariffs and Iran War Lift Prices

Q: If inflation is still above target and GDP beat forecasts, how long will the Fed keep rates high?

The Fed is likely to keep rates elevated well into 2027, with any cuts coming slowly unless inflation cools more decisively or growth weakens. The latest data strengthen the case for a longer hold. September PCE inflation rose 3.6% year over year and core PCE 3.1%, both still above the Fed’s 2% target, while third-quarter GDP grew at a stronger-than-expected 3.4% annualized pace. Consumer spending also remained firm. That combination tells policymakers that demand is still resilient and that inflation pressure has not fully broken. The Fed’s own September projections point to a prolonged restrictive stance rather than quick easing. Officials projected headline PCE inflation at 3.7% for 2026 and only reaching 2.3% in 2027, with the median federal funds rate seen at 4.1% at the end of 2026, 3.9% in 2027, 3.6% in 2028 and 3.2% in 2029. That path implies rates staying relatively high even as inflation gradually declines. Markets and economists broadly read recent Fed communications the same way: officials are in wait-and-see mode near term, but not ready to declare victory on inflation. Some underlying measures, such as trimmed-mean PCE, suggest inflation may be cooler than headline readings imply, which could reduce pressure for immediate further hikes. But as long as growth stays solid and inflation remains above target, the stronger likelihood is an extended pause at high levels, with only gradual easing starting in 2027 rather than a quick pivot.

3 articles · Updated · Yahoo! Voices · Nov 1

Inflation has climbed to 3.7% in Trump’s second term, with prices rising broadly from groceries to electricity despite his pledge to bring costs down.
Tariffs and the war in Iran are driving the spike, while the resulting uncertainty has left companies reluctant to add staff.
That has produced a low-hire, low-fire labor market, adding to pressure on households already facing higher everyday bills.
Trump still touts his economic record, but voters are giving his performance historically low ratings as inflation outpaces wage gains and threatens Republicans before the 2026 midterms.