Federal Reserve faces pressure as inflation stabilizes despite tariffs

In the United States, the inflation gauge preferred by the Federal Reserve remained largely unchanged last month, reflecting an intricate balance amid economic policies and external pressures. The Commerce Department reported that prices rose 2.6% in July compared to the same month last year, mirroring the annual increase recorded in June. Notably, when volatile food and energy categories are excluded, underlying prices escalated by 2.9%, up from 2.8% in the previous month, signifying the highest core inflation figure since February. This situation illustrates the cautious stance of Federal Reserve officials regarding potential interest rate cuts. Despite the decline from a peak inflation rate of approximately 7% reached three years ago, current inflation still exceeds the Fed's target of 2%. With Fed Chair Jerome Powell suggesting that a rate cut could happen at the upcoming meeting, the policymakers remain deliberative about their next steps. Throughout the year, President Donald Trump has persistently urged the Fed to lower interest rates, even going so far as to label Powell as “Too Late” and a “moron.” Trump’s pressure for a looser monetary policy arises from his belief that there is “no inflation,” notwithstanding the Federal Reserve's metrics indicating otherwise. Furthermore, the political environment has intensified, as Trump attempted to gain greater control over the central bank by seeking to dismiss Lisa Cook, a member of the organization's governing board. As these developments unfold, economic observers are closely monitoring the Federal Reserve's actions, weighing the risks of inflation against the need for economic stimulus. The delicate balancing act of maintaining price stability while stimulating growth will be pivotal in shaping the future trajectory of U.S. monetary policy.