Wall Street has spent this year waiting for prices to calm down. The war with Iran pushed oil up in February; the shock would wear off, and the Fed would go back to cutting rates. One of the banks that sold that idea has changed its mind.
Wells Fargo is not a gloomy voice on the U.S. economy. In June, its equity strategists raised the year-end target for the S&P 500 to 7,950 from 7,300, lifting its earnings forecast for the index, according to TheStreet. The people who forecast prices there are far less cheerful.
Their new numbers say the long slide in inflation everyone counted on is running out of road. Wells Fargo has lifted its inflation forecasts for 2026 and 2027, and now expects the Federal Reserve to raise rates by a quarter point before the year is out. The investment institute previously expected the Fed to remain on hold this year and in 2027, according to .
Costlier energy, new tariffs, and supply chains that still do not run smoothly are behind the change. The bank's own June targets show what that shift is up against. The Wells Fargo Investment Institute had inflation ending this year at 3.4%, easing again in 2027, while expecting the Fed funds rate to remain at 3.50% to 3.75%.
Those targets assumed the worst was over. The forecast now coming from the bank's economists does not. Bank of America CEO warns inflation will back Fed into a corner Bank of America just made a strong call on inflation, economy Goldman Sachs says Americans may pay for the AI boom Cheaper energy should still bring most of the relief next year.
After that, the bank sees the path go flat. Everyday services stay in demand, and the huge spending on artificial intelligence keeps pushing up what companies pay for workers, materials, and building work. That last part worries the bank because it does not fade on its own the way fuel prices do.
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