CPI Comes In With Higher Than Expected
https://wolfstreet.com/2025/09/11/cpi-inflation-dishes-up-an...
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Inflation, especially in “core services”, (housing costs, medical, insurance, etc.), is running well above the Fed’s comfort zone. Over 4% annualized in recent months.
At the same time, the labor market is cooling. Job growth is slowing; there are signals that wage pressures may begin to ease. “Cooling” but not crashing.
Despite inflation high, many expect the Fed to lower interest rates, potentially due to concerns about economic growth, political pressure, or because they judge inflation might begin to come down on its own. But lowering rates too soon risks stoking inflation further.
On top of that, the Fed has tools like quantitative tightening, (QT), which can theoretically work in opposite directions: cutting short-term rates vs. reducing liquidity via balance sheet shrinkage.
Inflation high: pressure to keep rates up; economy softening: pressure to ease rates. The Fed is squeezed.