2026 COLA Projections Increasing With Latest Inflation Trends
The June inflation data are likely to result in a higher 2026 COLA projection than the 2025 increase of 2.5%.
Latest Inflation Data Reflects June 2025 Prices
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3% in June, after rising 0.1% in May. The index for all items less food and energy rose 0.2% in June, following a 0.1% increase in May. This index excluding food and energy, is considered a better predictor of inflation because it is less volatile in a short term.
The increase in inflation may be the result of tariffs imposed by the United States on various countries, which could cause inflation to jump. That has not happened, but the latest data are an increase and could influence the Federal Reserve on a decision not to lower interest rates in the near future.
CPI-W Changes in June 2025
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) that is used for the annual COLA calculation increased 2.6% over the last 12 months to an index level of 315.945. For the month, the index increased 0.4%.
The CPI-W figure for June 2025 released today was 315.945. That is 2.3% higher than the average CPI-W for the third quarter of 2024. The COLA for the coming year is calculated by comparing the change in the CPI-W from year to year, based on the average of the third-quarter months of July, August, and September.
Last month, the monthly data were 1.98% higher than the average CPI-W for the third quarter of 2024 (compared to the latest 2.3% figure) so the June monthly data that were just released today will be pushing up the COLA for 2026.
Tariffs, Inflation, and COLA Projections
2025 has been a volatile year, marked by sharp spikes and drops in the stock market, as well as changes announced by the administration regarding economic policy, which have been impacted by tariffs imposed by the U.S. on other countries.
How have these events impacted the 2026 COLA projections? Probably not as much as some expected.
President Trump often makes policy announcements that are subject to change. It is a tactic that has served him well over time, and it makes headlines. He is not likely to change during the remainder of his term. David Kelly, chief global strategist at J.P. Morgan Asset Management, summarizes what has happened with inflation and the economy so far in 2025:
The new administration has implemented radical policy changes that should, at least in theory, have boosted inflation and slowed growth. And yet, almost six months after Inauguration Day, both unemployment and inflation are virtually unchanged from the start of the year, while U.S. stocks and bonds have generated healthy year-to-date returns.
2026 COLA Projections: How Estimates Have Changed
Several analyst groups, including The Senior Citizens League (TSCL) and independent policy experts, currently project a 2.5% increase for the 2026 cost-of-living adjustment. The projections have steadily risen month by month as new inflation data became available. For example, in March, TSCL forecasted 2.3%, then revised to 2.4% in May, and to 2.5% in June.
Based on the latest inflation data, the next projection is likely to increase again. For 2025, the COLA was 2.5%. This means a probable increase will be awarded in 2026 for a higher COLA than the final 2025 figure.
Federal and military retirees can generally expect their COLA increases to match the Social Security adjustment for those under the Civil Service Retirement System (CSRS) and, for those under the Federal Employees Retirement System (FERS), to often be slightly less, typically 1% below the full COLA for CSRS recipients depending on the amount of the CPI increase.
Why Have 2026 COLA Projections Changed?
The primary reason for changes in 2026 COLA projections is the change in inflation based on data from the last month.
Inflation data for the next annual COLA are tracked by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). As inflation has edged up slightly in early 2025, the projections were adjusted upward.
A recent decision by the Bureau of Labor Statistics (BLS) to reduce its data sample collection may affect inflation reporting. Some experts have expressed a concern this could lead to less accurate inflation numbers, potentially resulting in a smaller COLA for Social Security beneficiaries and leaving them with less buying power.
The BLS stopped collecting data from three cities in the second quarter — Lincoln, Nebraska, Provo, Utah, and Buffalo, NY — due to a staffing shortage that has resulted partly because of the current hiring freeze.
The Federal Reserve’s interest rate decisions may have played a role in keeping inflation from spiking or falling, but some significant costs (housing, healthcare, and food) remain elevated, and this is reflected in CPI-W data.
Uncertainty about the United States’ policy regarding tariffs may be part of President Trump’s strategy for reducing the debt and equalizing the trade cost with foreign countries. So far, the policy appears to have had some success. The uncertainty surrounding the tariffs imposed in mid-2025 also created concerns about possible higher consumer prices later in the year, and analysts have continued to monitor for any inflation spikes that could affect the final COLA.
The final COLA for 2026 will be based on CPI-W data from the third quarter of last year. Projections made throughout the year reveal trends in inflation and the COLA for the next year, but the final calculation for 2026 does not occur until mid-October.