Analysis: The Federal Reserve is likely to hold steady, as inflation remains an unpredictable economic variable

Odaily Planet Daily News Federated Hermes fund manager Karen Manna stated in a report that the institution continues to believe the Federal Reserve will largely hold steady, while inflation remains one of the most unpredictable macroeconomic variables. She noted that the shift from the low-inflation environment following the 2008-09 financial crisis to the surge in inflation after the pandemic was driven by supply chain disruptions, changes in consumption patterns, and labor market imbalances.

Although many of these distortions have subsided, a new set of variables continues to cast a shadow over the inflation outlook. These variables include tariffs implemented last year, a period of reduced economic visibility around the government shutdown last fall, elevated energy prices, and significant capital expenditures related to artificial intelligence. "The result may be that the disinflation process will be more uneven and phased than markets have experienced in past cycles, reinforcing the Federal Reserve's cautious and data-dependent approach." (Jin Shi)