UBS Economics-US Economic Perspectives _US Inflation Monthly Peering thro...-118525342

ab28 October 2025Global ResearchUS Economic PerspectivesUS Inflation Monthly: Peering through the fogPrivate sector data will be key over the next few months
We expect there will be no release of the October CPI. The lack of data will lead to issues for the November, December, and April CPIs where categories rely on the October observations to advance the index. If the missing data is properly accounted for then there should be no bias in any month's CPI, but the issues are not trivial and will lead to CPIs through the end of the year being a worse-than-usual accounting of the real inflation experience.
Until the government data is back to normal we will need to rely more on private sector data (like the Adobe DPI, Nielsen grocery store data, JD Power vehicle data, etc). But none of the private sector sources provide the breadth of coverage and the relatively consistent long history provided by the CPI and PCE prices. The issue is particularly acute for non-rent services prices.Elevated, but not too elevated, price changes in coming months
We currently project that core CPI increases will average 27bp over the remaining three months of the year — a bit lower than our expectations a month ago — with the October core CPI currently projected at 28bp. The headline CPI is projected to increase notably less (+15bp seasonally-adjusted, +6bp NSA) than the core in October as a result of declining gasoline and food at home prices.
We put little weight on the very low increase in owners' equivalent rent in the September CPI, and expect it to bounce back to more normal levels in October, though the longer-run trend for rents continues to be a gradual slowing.
Strong Adobe Digital Price Index increases in recent months, and expiring electric vehicle tax credits at the end of September, provide some upside risk that core goods prices will pick up more sharply in coming months than we project.
There is considerable uncertainty surrounding our inflation projection, particularly the timing of tariff pass-through. The forecast will be revisited as new information and new policies warrant. A detailed forecast spreadsheet is available on our website.Core PCE inflation: 3.0% in 2025, 3.0% in 2026, 2.4% in 2027
We continue to expect tariffs will gradually push up inflation with core PCE inflation peaking in the second quarter of next year at around 3.3%. We anticipate inflation should be declining in the second half of next year but it is likely to stay quite elevated through late 2026, and we expect it will still be above the FOMC's 2.0% inflation target in 2027.
This month we have revised down our core PCE price inflation projection for 2025 from 3.2% to 3.0%, and 2026 from 3.1% to 3.0%, on the weaker-than-expected incoming price data and the incorporation of exemptions to the tariffs. Our core PCE price inflation projection is in line with consensus this year. However, our inflation projections for 2026 and 2027 remain above current consensus inflation proje