Inflation Cooling but Fed Faces Challenges Hitting 2% Target Due to Sticky Prices, Imbalanced Labor Market
• Inflation has come down from peak levels, but getting to the Fed's 2% target will likely take time due to "sticky" components like housing and services • Sticky components like housing and services are less responsive to Fed rate hikes and market conditions • Labor imbalances dating back to the pandemic have contributed to elevated services inflation via higher wages and consumer prices • Government spending and fiscal issues could make it difficult for the Fed to get inflation fully under control • Fed Chair Powell seems unsure if the "last mile" to 2% inflation will actually be harder than the progress made so far