According to the latest inflation data, the American Association of Retired Persons (AARP) estimated on August 12 that the Social Security cost of living adjustment (COLA) for 2026 is expected to be 2.7%. This projection is 0.2 percentage points higher than the 2.5% increase implemented at the beginning of 2025.
The organization’s latest forecast indicates a heightened inflation risk, leading to several consecutive months of upward adjustments in its predictions. AARP stated that it will release its final 2026 COLA forecast in September, preceding the government’s official announcement in October. The organization highlighted the accuracy of its model in predicting last year’s 2.5% COLA and correctly anticipating inflation’s drop to below 3% in the early second quarter of 2024.
As the announcement of the COLA approaches, elderly individuals across the United States are anxiously awaiting the news. While a higher COLA would be welcomed as it increases monthly benefits, many may still feel disappointed. AARP’s Executive Director Shannon Benton stated in a press release, “Many seniors believe that COLA does not adequately reflect the inflation they are experiencing.”
Benton referenced a recent AARP survey that underlined the challenges faced by many retirees beyond rising prices. The survey revealed that one out of five elderly individuals must travel at least 30 minutes to reach medical services, with over half unable to use public transportation. AARP indicated that these challenges are closely linked to lower life satisfaction and increased difficulties.
With the updated COLA forecast and the U.S. annual inflation rate remaining unchanged in July, according to data from the Bureau of Labor Statistics, inflation has held steady at 2.7% for the second consecutive month. Core inflation (excluding food and energy) rose from 2.9% in June to 3.1%, slightly surpassing economists’ predictions.
On a monthly basis, the overall Consumer Price Index increased by 0.2%, lower than the 0.3% rise in June. Housing costs were a primary driving factor, with primary residence rent up by 0.3%. Food prices remained steady, while the energy index decreased by 1.1%.
The latest data indicates that the recent tariffs under the Trump administration have had minimal impact on consumer prices, with new car costs remaining stable and clothing prices increasing by 0.1%.
Despite the uptick in core inflation, analysts suggest that these figures are unlikely to deter the Federal Reserve from a potential rate cut next month, given recent signs of weakness in the labor market.
“Though inflation is on the rise, the rate of increase is not as concerning as some feared,” stated Morgan Stanley Wealth Management’s Chief Economic Strategist Ellen Zentner in a press release. “In the short term, the market may accept these figures as they would likely steer the Federal Reserve’s focus towards the weakness in the labor market, retaining the possibility of a rate cut in September.”
Economists are divided on how the new trade measures will ultimately affect consumer perceptions. Goldman Sachs estimates that Americans currently bear about 22% of tariff costs, with this figure potentially rising to around two-thirds by the end of the year if historical patterns repeat. This shift, the bank suggests, could drive up core inflation while alleviating businesses’ cost burdens.
The White House disagrees with this view, asserting that foreign exporters and companies will continue to bear the majority of the costs.
White House Press Secretary Karoline Leavitt stated that the latest Consumer Price Index data reinforces the government’s position that tariffs have not driven inflation and highlighted that since Trump took office, inflation has averaged 1.9%. Leavitt pointed out that since January, energy prices have fallen, egg prices have dropped by 20%, citing this as evidence that essential household items remain affordable.
“Today’s CPI report shows inflation once again coming in better than market expectations and steady, underscoring President Trump’s commitment to reducing costs for American families and businesses,” Leavitt stated in a press release. “The data continuously proves the naysayers wrong—President Trump’s tariffs are delivering billions in revenue, small business confidence is at a five-month high, and real wages are rising.”
Some analysts anticipate that the impact of tariffs is temporary. Analysts at Dutch International Group predicted in a recent report that many prices in the affected categories may rise over time, describing the current inflation effect as “quite tame” as companies are absorbing most costs. They compare the current situation—cooling rents, cheaper energy, and a soft labor market—to mid-2022 when price pressures were much stronger.