Why Inflation Will Stay “Higher for Longer”

Inflation would just… go away.

That’s what then-chairman of the Federal Reserve, Jerome Powell, told the world back in 2021. (It happened to be on my birthday, Jan. 27.)

In his words at the time, post-COVID inflation was, “likely to be transient and not to be very large.”

Not long after that, I said the Fed was delusional… that inflation was destined to remain high for some time.

And here we, some time later, and inflation remains elevated. It proved as transient as a squatter.

So much so that the Fed now seems to agree with that dude who writes Field Notes every day.  At its June meeting, the Fed quietly raised its own forecasts for inflation.

The Fed’s preferred inflation measure is something called Personal Consumption Expenditures (PCE).

The poohbahs who manipulate the US economy and the dollar now expect PCE to end 2026 at 3.6%, up from their original 2.7% prediction.

They expect core PCE will fall to 2.5% by the end of 2027… which honestly means nothing because, well, I just showed you their originally projection for 2026 was wrong.

Which is the problem, actually: Something always goes wrong.

I mean, maybe we would have seen a 2.7% PCE reading by the end of the year.

But then along came a hankering for pointless war, and boom! go the bombs and consumer prices.

Unlike inflation, the war will be transitory… ultimately. So does that mean inflation falls?

To a degree, sure. But what the media miss when they cheer lower inflation is that lower inflation is not falling prices.

It means prices are still rising, just a bit slower than last month or last year. You’re still paying more… so are we cheering for higher prices now? Did I miss that memo?

And look at where inflation is coming from and you can see that the war isn’t the reason for higher prices in many cases.

Start with electricity.

Data centers, necessary for AI to function, now account for roughly 40% of all US electricity demand growth, according to Goldman Sachs, which is a big reason why electricity prices rose nearly 7% last year alone—more than double headline inflation.

AI is not going away. Plus, America’s utilities are in the midst of a $1.4 trillion wave of capital spending. That money works its way into the utility rates you and I pay.

All of which means utility-price inflation is baked into the future.

Then there’s insurance.

Homeowners’ premiums jumped 24% between 2021 and 2024 and they’re still climbing, expected to rise 4% to 6% this year.

Auto insurance is up roughly 64% since 2020, driven by pricier cars, pricier repairs, and costlier vehicle technology, among other factors. None of that is the Fed’s fault, and none of it is coming down.

Food has its own underlying story, and beef is the clearest example: the US cattle herd stood at 86.2 million head as of January 1, 2026—the lowest since 1951, 75 years back.

That’s a multi-year, drought-and-consolidation-driven contraction that has nothing to do with tariffs or war. It takes years to rebuild a herd.

Beyond cows, we have Godzilla, which is what the science guys are calling the El Niño weather pattern now forming. That is historically brutal on coffee and cocoa, so your mocha-chococcino from your favorite caffeine slinger is going to cost you more soon enough.

And then there’s the recent New York Fed survey showing nearly half of tariffed businesses in the NY Fed’s district say more price hikes are coming. That district (New York state, Connecticut, parts of New Jersey, Puerto Rico, and the US Virgin Islands) tends to be a leading indicator because it trades heavily with the rest of the world.

The point being: The tariff bill on American families hasn’t fully arrived yet.

I’ve not touched on medical care, physicians, motor vehicle repair/maintenance, shelter, apparel, etc. They’re all getting more and more expensive, too.

None of this gets us back to anywhere near 2% inflation (the Fed’s preferred rate) any time soon.

The only likely way that happens: Genuine demand shock—a real recession, a sharp AI capital-expenditure pullback, or the Fed deliberately breaking something.

Without that, we’re looking at built-in higher inflation in America.

New Fed Chair Kevin Warsh has promised to be “unambiguous and unanimous” about the Fed hitting its 2% inflation target.

Yeah, well, good luck with that, Skippy.

The rest of us should just keep stacking the assets that are going to weather the storm to come. Gold, silver, copper, Swiss francs, and bitcoin.