Inflation Remains Unpredictable Economic Variable, Fed Likely to Hold Steady: Federated Hermes on July 16

According to Federated Hermes fund manager Karen Manna in a report on July 16, the institution believes the Federal Reserve will likely hold steady while inflation remains one of the most unpredictable macroeconomic variables. The shift from the low-inflation environment after the 2008-09 financial crisis to the post-pandemic inflation surge was driven by supply chain disruptions, changing consumption patterns, and labor market imbalances.

Although many of these distortions have faded, new variables continue to cloud inflation prospects, including tariffs implemented last year, elevated energy prices, and large capital expenditures related to artificial intelligence. Manna noted that the result is likely to be a more unbalanced and staged disinflation process than in previous cycles, reinforcing the Federal Reserve's cautious, data-driven approach.