United States: Upside risks persist – UOB

UOB’s Alvin Liew highlights that US inflation in September accelerated, driven by energy and firm shelter costs, with broader underlying pressures across goods and services. He expects Headline CPI to stay above 3% through 2026, possibly nearing 4% if energy remains elevated, while both headline and core inflation are projected to gradually ease toward 2% in 2027.

Inflation risks tied to energy costs

"The inflation outlook remains tilted to the upside, reinforcing expectations that the Fed will maintain a hawkish stance: Headline CPI is expected to remain above 3% through the rest of 2026, with a risk of approaching 4% should energy prices remain elevated amid ongoing Middle East tensions."

"We continue to forecast average inflation of 3.5% for headline CPI and 2.8% for core CPI in 2026, with both measures gradually easing toward 2% in 2027."

"Looking ahead, headline CPI is likely to stay elevated at the above 3% range with a risk of peaking to 4% in some months if energy prices stay elevated due to the on-going Middle east developments."

"We are still projecting both headline and core CPI inflation to ease towards 2% in 2027 provided energy prices remain contained and shelter inflation continues to normalize."