The Fed’s Rate Cut Plans Stalled by Persistent Inflation

The Federal Reserve had initially planned a series of rate cuts to ease financial conditions, but persistent inflation continues to be a major roadblock. Despite market expectations for aggressive easing, the Fed is now facing a more complex economic landscape, making it difficult to justify further reductions.

Wall Street’s Miscalculated Rate Forecasts

Last year, major investment banks — including Goldman Sachs and Morgan Stanley — widely anticipated a series of rate cuts, with most forecasting more than five reductions in 2024. However, those predictions have proven overly optimistic. So far, the Fed has only implemented three consecutive cuts, as inflationary pressures remain stubbornly high.

Sticky Inflation: A Growing Concern

One of the key indicators of inflation, the core Consumer Price Index (CPI), is projected to have risen 3.3% year-over-year, marking the fourth consecutive month at this elevated level. This stagnation suggests that inflation is becoming increasingly entrenched, rather than showing the steady decline the Fed had hoped for.

Additionally, the Personal Consumption Expenditures (PCE) index — the Fed’s preferred inflation gauge — continues to reflect resilience in consumer…