The possibility of rate cuts being put on hold indefinitely is very real, as the Federal Reserve’s perspective on recent inflation spikes being a temporary bump on the road to 2% inflation may need to be reconsidered. This is due to another disappointing inflation report, which has raised concerns about the Fed’s ability to achieve its target of 2% inflation.
In fact, the most recent United States consumer price inflation data undermines any expectations of rate cuts in the near future. Core CPI has plateaued just below 4%, which is double the Fed’s target. This is likely to have a negative impact on the Fed’s preferred inflation gauge, pushing it higher and making it increasingly challenging to achieve the 2% target in the near term.
This news suggests that the Federal Reserve may need to adjust its monetary policy approach if it wants to meet its inflation target. Rate cuts are one option, but they may not be enough if core CPI continues to rise at such a rapid pace. It remains to be seen what other measures the Fed will take in order to bring inflation under control and maintain stability in the economy.
