Conference Board economist sees inflation stuck above 2% until 2028

Inflation will not reach the Federal Reserve's 2% target until 2028, according to Conference Board Chief Economist Dana M. Peterson, who cited persistent market shocks locking in elevated consumer prices.

Inflation will not reach the Federal Reserve's 2% target until 2028, Conference Board Chief Economist Dana M. Peterson said, as a series of market shocks have locked in elevated consumer prices that show little sign of retreating.

"Consumers shouldn't expect prices to fall anytime soon," Peterson said in remarks reported Friday. The economist pointed to structural factors that have embedded higher costs across the economy, delaying the path back to the Fed's price stability goal by several years beyond what policymakers had anticipated.

The forecast extends the timeline for achieving the Fed's 2% objective by roughly two years beyond the central bank's own most recent projections. Peterson's assessment suggests that the disinflation process has stalled at a level above target, with price pressures becoming entrenched through supply-side disruptions and shifting consumer expectations. The warning comes as the Fed has maintained its benchmark policy rate at elevated levels, with markets pricing a delayed easing cycle.

Why the timeline matters

The extended timeline carries significant implications for monetary policy and household finances. If inflation remains above 2% through 2028, the Fed would be forced to keep interest rates higher for longer than markets currently anticipate, extending the period of restrictive policy well into the next decade. That would raise borrowing costs across mortgages, credit cards, and corporate debt, compounding affordability pressures on American households already grappling with cumulative price increases of more than 20% since early 2021.

For financial markets, a delayed return to target inflation would upend current expectations for rate cuts. Bond yields would likely rise as investors repriced the path of monetary policy, while equity valuations — particularly in growth and technology sectors sensitive to discount rate changes — could face renewed pressure. The US dollar may strengthen on the prospect of relatively tighter US monetary policy compared with other major economies.

Market shocks and structural inflation

Peterson attributed the prolonged inflation outlook to "market shocks" that have locked in higher prices across key categories. These include persistent energy price volatility tied to geopolitical tensions, reshoring-driven supply chain costs, and a tight labor market that has kept wage growth above levels consistent with 2% inflation. The combination has created what economists call "inertial inflation" — price increases that, once embedded, resist downward pressure even as demand cools.

The Conference Board's view aligns with a Reuters poll showing war-driven inflation fears have failed to shake the US Treasury yield outlook, suggesting bond investors also see price pressures as structurally higher. The survey indicated that expectations for long-term yields remain elevated, reflecting a market that has already priced in a higher-for-longer rate environment.

This article is for informational purposes only and does not constitute investment advice.