America’s battle with inflation is about to get trickier

It was never in doubt. In the run-up to the Federal Reserve’s meeting this week, investors assigned a probability of nearly 99% to a decision by the central bank to raise interest rates once again. On July 26th policymakers duly fulfilled those expectations, with their 11th increase in 12 meetings, together making for America’s sharpest course of monetary tightening in four decades. The central bank’s next steps, however, are clouded by uncertainty.Some economists are convinced that this will be the Fed’s last rate rise in this cycle. Inflation has come down from its highs in 2022, with consumer prices rising just 3% year-on-year in June. Core inflation—which strips out volatile food and energy costs—has been a little more stubborn, but even it has started to soften, in a sign that underlying price pressures are easing. This opens a pathway for the Fed to relent, hopefully guiding America to a much-discussed soft landing. Ellen Zentner of Morgan S …

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