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This document provides a forecast of U.S. inflation, critical for adjusting costs in planning processes, including natural gas pricing. The analysis assumes that The Great Recession reduced inflationary pressures due to labor idling. Short-term inflation is projected to remain low, while long-term inflation is expected to rise, influenced by higher unemployment and federal deficits. Key uncertainties include U.S. and global economic growth, as well as fiscal and monetary policies. The forecast utilizes data from the Philadelphia Fed’s Livingston Survey.
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Inflation • Background • This is a forecast of U.S. inflation • It is used to escalate constant dollar costs and values used in the planning process, such as natural gas prices, to nominal dollars • Assumption • The Great Recession idled resources, particularly labor, and relieved inflationary pressures • The forecast calls for low short-term inflation, rising in the long-term • Change from the previous forecast: • Higher unemployment leads to lower shorter-term inflation • Higher federal deficits lead to higher long-term inflation • Ranges • Major drivers of uncertainty: • U.S. & world economic growth • U.S. fiscal/monetary policy • Technology/resources • The high and low range was developed using the range of forecasts from the Philadelphia Fed’s Livingston Survey of national economic forecasters • Forecast mean absolute % error: 1-yr=0.6%; 5-yr=0.6%; 10-yr=0.1% Inflation ― GDP Implicit Price Deflator
