This remains well below the 3.7% peak rate seen in 2008. Consumer inflation should increase mildly through 2020. The US core personal consumption expenditures deflator (less food and fuel) rose 2.0% y-o-y, which is in line with the Federal Reserve’s objective. However, with strong growth and very low unemployment rates, IHS Markit projects US core inflation will continue to rise gradually, hitting 2.3% by 2020. Inflationary risks are pointing to the positive as a result of actual and threatened tariffs. Prices are rising substantially for some commodities, such as steel and aluminum, as well as for key imports from China. If the current actions trigger a trade war, prices will rise on a broader scale and push up aggregate inflation, lower output growth, and create a new set of risks for the Fed.