Approaching the final stage of inflation control, the Federal Reserve seeks an opportunity to shift policy

According to the latest analysis by Russell Investments senior investment strategist Mr. Lin, the Federal Reserve’s inflation measures are finally approaching their conclusion. Currently, the fundamental price pressures are expected to be contained, with stable trends anticipated over the next two years.

Mr. Lin commented, “The goal is coming into view,” emphasizing that the inflation mitigation campaign is entering its final stages. The results of previous policy responses are beginning to clearly manifest, and market perceptions are shifting toward a reduced inflation risk.

Labor Market Stabilization Eases Price Pressures

A major factor supporting the easing of inflation pressures is the improvement in the labor market. The employment sector is gradually regaining balance, notably exerting a significant effect on suppressing inflation in the service sector. This stabilization of the labor market functions as a key mechanism to weaken medium-term price pressures and supports the Federal Reserve’s policy objectives.

Tariff-Related Inflation Expected to Ease in the Second Half of the Year

Mr. Lin pointed out that tariff-induced inflation pressures are likely to decline gradually in the second half of 2026. Considering the recent significant role of tariffs in inflation pressures, this easing directly contributes to overall price stability. Simultaneously, active movements in the U.S. real estate market are expected to continue functioning as a deflationary factor, creating a synergistic effect of multiple stability drivers.

Inflation Manageable from 2026 to 2027

Even in scenarios where the U.S. economy maintains trend-level growth or slightly exceeds it, Mr. Lin states that inflation will remain moderate and manageable. This outlook supports the overall market expectation that inflation risks are gradually receding.

As fundamental price pressures diminish, the Federal Reserve may gain greater flexibility in its policy outlook. As a final phase of inflation mitigation, future policy adjustments are expected to seek a new balance—maintaining market stability while fostering economic growth.