President Donald Trump may be celebrating his long-awaited victory over the Federal Reserve’s rate policy, but underneath the surface, inflationary pressures remain dangerously persistent.
Earlier this week, the Federal Reserve cut its benchmark interest rate by 25 basis points to a range of 4.00%-4.25%, meeting widespread expectations. The move followed mounting political pressure and signs that the central bank is now leaning more heavily into the labor market part of its dual mandate, potentially at the expense of curbing inflation.
But here’s the catch: the Fed’s own projections show inflation staying above the 2% target well into 2027.
In its updated “dot plot,” Fed policymakers penciled in two more rate cuts in 2025, bringing the median year-end rate to 3.6%. One additional cut is expected in both 2026 and 2027.
This easing cycle is occurring despite upward revisions to inflation forecasts, with core PCE inflation expected at 3.0% in 2025, 2.6% in 2026, and only reaching 2.1% in 2027.
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