While a general decrease in prices (deflation) is not broadly expected, the rate at which prices are increasing (inflation) is predicted to continue to decline this year in many parts of the world.
Here's a breakdown of what to expect:
Global Outlook:
* Global inflation is forecast to steadily decrease from 6.8% in 2023 to 5.9% in 2024 and 4.5% in 2025.
* Advanced economies are expected to reach their inflation targets sooner than emerging market and developing economies.
* Core inflation, which excludes volatile food and energy prices, is generally projected to decline more gradually.
United States:
* The Personal Consumption Expenditures (PCE) inflation, a key measure for the US, is projected to average 2.4% in 2024, down from 3.7% in 2023.
* Morningstar predicts a further drop to an average of 1.8% over 2025-2028, falling just under the Federal Reserve's 2% target.
* This decline is attributed to ongoing supply chain improvements and an expected deceleration in GDP growth.
* The Consumer Price Index (CPI) for all items in the US rose 2.9% from December 2023 to December 2024.
* As of August 2025, the headline inflation rate was 2.9%, and core inflation was 3.1%.
* Food prices in the US are predicted to increase by 3.0% in 2025.
Factors influencing the trend:
* Central bank interest rate hikes have been a significant factor in bringing down inflation.
* Improved supply chain issues are also contributing to moderating inflation.
* While a recession was once thought necessary to curb inflation, the US economy has seen inflation fall without one, although a period of weaker GDP growth is anticipated.
It's important to remember that economic forecasts can change, and unforeseen global events could impact these predictions.