Sticky Inflation Resurgence — Tariffs, AI Capex & Geopolitical Shocks Keep CPI Elevated Through Q3 2026

U.S. CPI inflation will remain persistently above the Fed's 2% target over the next 6 months (through October 2026), driven by three reinforcing tailwinds: ongoing tariff pass-through into consumer prices, AI-driven supply constraints in energy and semiconductors, and energy price volatility from the Iran conflict. The Fed will hold rates steady or cut only once, and TIPS will outperform nominal Treasuries.

Three simultaneous inflation vectors — tariff pass-through into goods prices, energy cost transmission from the Iran/Hormuz disruption, and services inflation from AI-driven labor market tightening — were unlikely to resolve together on the Fed's timeline. The "last mile" from 2.4% to 2% CPI had proven elusive even before tariffs added a new source of price pressure in 2026. TIPS as the primary vehicle captured the view that real rates would fall as inflation prints stayed elevated while the Fed held nominal rates steady — a classic stagflationary setup where the inflation-protected asset wins regardless of whether the Fed blinks or holds.