Advertising Disclosure

Retirees should expect prices to keep rising in 2026

But Bank of America sees growing stability later in the year

Updated:

Avatar photo
By:
Avatar photo

Mark Huffman
Reporter

Mark Huffman has covered consumer issues since 2004, with a special focus on protecting and empowering older adults. A former news correspondent for the Associated Press Radio Network, Westwood One, and ConsumerAffairs, Mark brings decades of journalistic experience to RetirementLiving.com. He is passionate about giving consumers a voice and helping them make informed decisions. Mark has also created educational content, including Senior Scam Alert, a video resource designed to help seniors recognize and avoid fraud. He holds a B.A. from the University of Kentucky and lives with his family in Richmond, Virginia.
brijesh-reddy-unsplash

Photo by Brijesh Reddy on Unsplash

Key Insights

  • Bank of America (BofA) now expects U.S. headline inflation in 2026 to reach 2.6%, while its “core” inflation — excluding volatile categories like food and energy — is forecast at 2.8%.
  • The bank warns that ongoing tariff pressures could keep core inflation elevated above 3% through the third quarter of 2026. 
  • Despite the inflation reset, BofA sees 2026 as a year of “sunny-side up” economic conditions: moderate inflation, resilient growth, and enough catalysts (like business investment and consumer spending) to support financial markets.

Rising prices provide a burden, not just for young families but also retirees living on a fixed income. Will prices continue to go up next year?

In its latest macroeconomic outlook, Bank of America Global Research bumped up its 2026 inflation projections, revising the bank’s expectations to 2.6% for headline inflation and 2.8% for core inflation. This shift reflects growing concern over persistent price pressures — notably from tariffs and lingering supply-chain constraints — but also acknowledges recent signs of cooling inflation momentum. 

The bank’s economists caution that the U.S. could see core inflation remain stubbornly above the usual 2% target for much of the year, especially during the first half. Tariff-related costs to goods are seen as a main driver, potentially keeping core prices elevated through 3Q 2026. 

Still, BofA describes its central scenario for 2026 as somewhat optimistic. It foresees a U.S. economy propelled by consumer resilience, business capital expenditures (especially in technology and infrastructure), and a favorable backdrop from expected policy moves.

Why the inflation reset, and what it means

Several factors underpin BofA’s upward revision:

  • Tariffs and trade policy friction — new or persistent tariffs are raising input costs, which tend to filter through to consumer prices.
  • Lagged effects of economic and monetary conditions — earlier periods of high inflation, combined with still-tight supply dynamics, mean that even if pressures ease, it could take time for inflation to normalize fully.
  • A rebound in business investment, especially tied to AI, infrastructure, and technology — BofA expects that capital spending will support growth, but that might also contribute to moderate price pressure.

For consumers, the outlook suggests a return to a “new normal”: price increases likely to continue somewhat faster than the 2% benchmark many have come to expect. At the same time, growth and investment may help cushion against the risk of a downturn or stagflation.

Implications for everyday life

  • Interest rates — and monetary policy: With inflation not collapsing toward 2% immediately, the Federal Reserve will likely remain cautious about aggressive rate cuts. The risk is that premature easing could re-ignite price pressures.
  • Investor strategy: As BofA itself suggests, equities — especially in AI, infrastructure, and other capex-heavy sectors — may still perform well in 2026 under a moderate inflation regime.
  • Household budgeting and cost of living: Consumers should prepare for continued price increases in everyday goods and services, even if inflation slows relative to 2022–2023 peaks. The “core” cost increases — rent, services, durable goods — may linger longer than expected.
  • Wage and labor dynamics: Given that inflation remains elevated, workers may continue to press for higher wages; at the same time, employers will face pressure to manage costs, which could shape hiring, pay raises, or benefits.

Outlook with a grain of salt

While BofA’s revision sets a new baseline for inflation expectations in 2026, there remains significant uncertainty. Key unknowns include future policy moves (tariff changes, fiscal policy), the behavior of energy and commodity prices, and how consumer and business behavior shifts in response to inflation.

In other words: 2.6–2.8% is not a guaranteed outcome — but under BofA’s “base case,” it’s the number to watch.