Stable Inflation and Its Implications for the Federal Reserve’s Policy and Investment Strategy
The Federal Reserve’s recent policy calculus has been shaped by a delicate balance between inflationary pressures and labor market fragility. While headline inflation has moderated from post-pandemic peaks, core inflation—excluding volatile food and energy—remains stubbornly above the Fed’s 2% target. The July 2025 Consumer Price Index (CPI) data revealed a 0.3% monthly increase in core CPI, with a 3.1% annualized rate, driven by rising shelter costs and tariff-related price hikes in goods like tools and household appliances [1]. This trend aligns with broader inflation nowcasting models, which project core CPI inflation reaching 3.3% by year-end [2].
The Fed’s “wait-and-see” approach is evident in its July 2025 FOMC…
