The Federal Reserve watches the PCE index more than the CPI. The CPI is released at mid-month and the PCE in the last week.
Energy prices rose during the Iran war but even core PCE, which excludes food and energy, rose.
The bond market still believes that the Fed will be able to bring inflation down to 2.1% within 5 years.
Given the growing government deficits and tariffs…and the experience of the 1970s where inflation crept up relentlessly…I don’t believe that.
And I don’t believe that the Federal Reserve will cut the fed funds rate in 2026. Given the high inflation and strong economy, the FOMC should raise the fed funds rate. The options market gives this a pretty strong likelihood.
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
Wendy