Analysis: The Fed is essentially expected to hold steady, with inflation remaining 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 Fed will essentially remain on hold, while inflation remains one of the most difficult macroeconomic variables to predict. She indicated 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, shifts in consumption patterns, and an imbalance in the labor market.

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 around the government shutdown last autumn, high energy prices, and significant capital expenditures related to artificial intelligence. "The result could be that the disinflation process will be more uneven and phased than what markets have experienced in past cycles, reinforcing the Fed's cautious, data-dependent approach." (Jinshi)