Inflation Is Cooling Off. Does This Mean a Lower Social Security COLA in 2026?

If you haven't seen the latest inflation data, the general idea is that prices are rising more slowly than expected.

We recently got a look at consumer price index (CPI) data for April, and the year-over-year inflation rate was 2.3%. Not only is this the lowest inflation figure since early 2021, but it was one-tenth of a percentage point lower than economists had expected. The core CPI, which excludes food and energy prices, matched annual estimates with a 2.8% increase, but the monthly rise was lower than expected.

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This is a little lower than the latest projection for the 2026 Social Security cost-of-living adjustment, or COLA, from the Senior Citizens League (not a government organization). Its latest estimate calls for a 2.4% COLA next year, which is slightly less than the 2.5% seniors received in 2025. But if inflation has been declining so far in 2025, couldn't the trend continue? With the Social Security COLA based solely on third-quarter inflation data, a continued decline in inflation could certainly have COLA implications.

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However, just because inflation was cooler than expected in April doesn't mean the trend will continue. Here's why many experts don't expect the low inflation to last, and what it could potentially mean for the 2026 COLA.

1 big factor to consider

As mentioned, the Social Security COLA uses third-quarter inflation data each year to determine the effect of inflation. The Social Security Administration looks at CPI data (specifically the CPI-W) from July, August, and September, and compares it with the same period from the prior year. The increase in the CPI-W is rounded to the nearest tenth of a percent, and that becomes the COLA.

One important point to keep in mind is that April's consumer price index data included some of the effects of President Donald Trump's tariffs, but not much. There were a few notable effects, such as a rather large 9% jump in the prices of audio equipment.

Several prominent economists believe that we haven't yet seen the majority of the effect from the tariffs in the inflation data. In a CNBC interview, Moody's chief economist Mark Zandi said he expects to see a noticeable effect from tariffs in the May inflation data that we should get midway through June. Another economist from the Peterson Institute for International Economics estimates that a 10% average tariff rate could add as much as 1% to the CPI "after about six to nine months."

Wells Fargo senior economist Sarah House said: "I think tariffs are the biggest question mark over the inflation outlook."

What will the 2026 COLA be?

Because it's based on third-quarter inflation, it's impossible to predict the 2026 COLA with any degree of accuracy. Because of the ongoing tariff back-and-forth, as well as a generally slowing U.S. economy, the inflation rate on the back end of the year is more uncertain than it usually is.

Essentially, the 2026 COLA is going to depend on just how much of an effect we actually end up seeing from tariffs. There are two key questions: What will the tariffs be when the dust settles, and how much inflationary pressure will the implemented tariffs put on inflation?

If the trade war intensifies sharply and tariffs end up higher than expected, it could result in a spike in inflation and make the COLA significantly higher than the latest projection indicates. On the other hand, if tariffs end up essentially being quickly negotiated away and/or become a non-event for inflation data, it's entirely possible that inflation could continue to fall during the rest of 2025. The most likely outcome is somewhere in the middle of those two extremes -- but where in the middle is anyone's guess at this point.

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