Inflation Trends and Fed Policy

Recent data on inflation showed a slight increase in the U.S. Consumer Price Index (CPI), with core CPI reaching 3.3 percent instead of the expected 3.2. However, the six-month annualized trend suggests a more stable inflation rate around 2.6 percent, indicating a slow decline. Notably, shelter inflation, which had previously alarmed the Federal Reserve, is beginning to show signs of improvement. This could imply that the Fed may feel comfortable cutting rates by 25 basis points per meeting, as long as the core Personal Consumption Expenditures (PCE) remains around 2.5 percent, signaling a manageable inflation environment.