BNY strategists cite persistent supercore inflation above pre-COVID levels as a key factor in Fed policy debates.
BNY strategists highlight elevated US supercore inflation—core services excluding shelter—as a critical argument for potential Federal Reserve tightening. The measure has run nearly 1 percentage point above its pre-pandemic pace since mid-2023, driven partly by rising transportation costs, including airfares.
While supercore inflation remains sticky, it has not accelerated recently, leading strategists to favor a July hold despite acknowledging the meeting as a close call. The Fed’s Inflation Frameworks Task Force, led by Chair Kevin Warsh, is also reassessing inflation measures like trimmed mean inflation, which could influence future policy decisions.
Market participants are closely monitoring Fed speakers, some of whom have expressed concerns about inflationary pressures beyond supply shocks and tariff effects. The debate underscores uncertainty around the Fed’s next moves amid persistent price pressures.