The Cleveland Fed’s Inflation Nowcasting tool projected on Monday, May 11, that trailing 12-month inflation would climb to 3.89% in May, a jump that pushes the Social Security 2027 cola debate back into focus. The move matters because the same inflation gauge that helps drive retirement checks has been running hotter than the Fed’s 2% target for years.
If that forecast holds, it would mark a sharp turn from February, when U.S. trailing 12-month inflation stood at 2.4%. Social Security’s 2025 cost-of-living adjustment was 2.8%, and it was the first time in nearly three decades that benefits rose by at least 2.5% for five consecutive years. The average monthly retired-worker benefit also surpassed $2,000 for the first time in 2025, making next year’s adjustment feel less abstract to millions of retirees.
That is the weight behind the latest inflation outlook. Since 1975, Social Security has used the Consumer Price Index for Urban Wage Earners and Clerical Workers as its inflation-measuring yardstick, but only the trailing 12-month readings ending in July, August and September are used to calculate the annual adjustment. That means the May projection is not the number that will set the 2027 payout, but it is a warning shot about where prices may be heading when the calculation window arrives.
The pressure comes in part from energy markets. The article says the effects of President Trump’s Iran war are expected to increase trailing 12-month inflation by almost 150 basis points over three months, after Trump gave the green light at the end of February for U.S. military forces to commence attacks against Iran. Iran then closed the Strait of Hormuz to most commercial shipping vessels, and the disruption tied up 20 million barrels of petroleum liquids per day, equal to 20% of global crude oil demand.
That kind of supply shock has already shown up at the pump. Gas prices have risen at their fastest pace in more than 30 years, adding another layer of strain for households that have not had much room to absorb it. The Federal Reserve began targeting a 2% long-term inflation rate in 2012, but inflation has stayed above that mark for the last five years, leaving both policymakers and retirees watching every new reading with unusual attention.
The question now is not whether Social Security checks will keep rising, but how much inflation will be left standing when the July-through-September window opens. A stronger reading in those months would translate into a bigger 2027 increase, while a cooling trend would pull the adjustment back. For retirees counting on a larger check, the path of prices over the next few months will matter more than any single forecast.
