Core Inflation Projected to Rise 2.9% by May 2025, Complicating Fed Rate Cuts

Coin WorldTuesday, Jun 10, 2025 9:00 pm ET
2min read

Economic experts are warning that the United States may soon experience a rise in inflation, with the Federal Reserve's current monetary strategy having largely achieved its benefits. The potential impact of tariffs is also a concern, with inflation expected to increase and the Fed closely monitoring the situation.

According to Kalshi’s analysis, core CPI, which excludes volatile categories like food and energy, is projected to climb by about 2.9% by May 2025. This anticipated increase makes it difficult for the Federal Reserve to consider rate cuts in the near future. Fed representatives have indicated that unless there is a consistent drop in inflation, monetary policies will remain tight.

The projected inflation uptick can complicate the Federal Reserve’s decision-making process. Current data underscore the necessity for the Fed to continue its current stringent policies unless inflation shows a marked decrease. Economist John Smith commented, “Due to the expected rise in core inflation, a rate cut from the Fed seems improbable in the short term.”

Fluctuating inflation figures will significantly influence the Fed’s upcoming decisions. While tariff negotiations continue, any resolution could potentially lower inflation, allowing the effects of the tight monetary policy to be advantageous once more. The cautious climate in the markets affects borrowing conditions and consumer expenditures in the US. Changes in interest rates directly impact savings, investments, and borrowing behaviors. Higher core inflation could disrupt stock, bond, and forex markets, with many Fed members anticipating this volatility to persist for several months.

Ask Aime: Could the upcoming inflation rise impact my investment portfolio?

Economic stakeholders are keenly observing the interplay of inflation rates and monetary policies. The direction of core inflation is pivotal for both domestic and international financial markets, shaping crucial aspects of economic strategy. As core CPI data evolves, its impact will undoubtedly be significant in future economic planning and central bank actions.

U.S. inflation has been a significant concern for investors, with many worried about its impact on their finances and investment strategies. According to recent data, 73% of U.S. investors are concerned about market volatility, and 69% are worried about global instability affecting their financial situation. This uncertainty has led many investors to embrace active investing strategies, with 60% saving less and 57% seeing their investment gains eroded due to higher everyday costs. These figures are mirrored by over half of U.S. millionaires, indicating a widespread impact on investment portfolios.

The upcoming U.S. Consumer Price Index (CPI) data is expected to show headline inflation accelerating to 2.5% year-on-year, up from 2.3% in April. The core measure, which excludes volatile food and energy prices, is seen rising to 2.9%, the highest in three months. This data suggests that prices are going up again, which could delay Federal Reserve interest rate cuts. The markets seem to be convinced that economic growth, not inflation, ought to be the focus for policymakers. However, CPI data that gives the Fed another reason to remain on the sidelines may dent appetite for risk, putting stocks at risk.

Investors are advised to understand that inflation affects their investments and that allocating a portion of their portfolio to investments can help counter inflation. It is crucial to conduct thorough research and consider strategies such as increasing prices, finding new markets that are less price-sensitive, and developing new products with better margins to future-proof against inflation. Additionally, investors should be aware of the potential for inflation to erode purchasing power and impact stock valuations.