Will inflation reach more than 5% in 2026?

Recent June CPI data showed headline inflation easing to 3.5% year-over-year from May’s 4.2% peak, driven by a sharp drop in energy prices after the U.S.-Iran ceasefire, while core CPI fell to 2.6%. The Federal Reserve has held the federal funds rate steady at 3.5–3.75% amid concerns that inflation may reaccelerate later in 2026, with markets pricing a possible December hike. Trader sentiment on Polymarket reflects this moderation, assigning only a 21% implied probability to inflation exceeding 4.5% for the year and lower odds for higher thresholds. The July CPI release tomorrow, alongside upcoming FOMC communications and labor market data, will provide key updates on whether the disinflation trend persists or reverses.

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