Analysis: Fed is likely to hold steady, with inflation remaining an unpredictable economic variable

Odaily Odaily News Federated Hermes fund manager Karen Manna stated in a report that the institution continues to believe the Fed will largely hold steady, while inflation remains one of the most difficult macroeconomic variables to predict. 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 consumer spending 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, periods of reduced economic visibility surrounding the government shutdown last fall, high energy prices, and significant capital expenditures related to artificial intelligence. "The result could be that the path of disinflation will be more uneven and phased than the market has experienced in past cycles, reinforcing the Fed's cautious and data-dependent approach." (Jin Shi)