The Fed can now declare victory over inflation

When it comes to inflation, America has reached a "Mission Accomplished" moment.

- ALLISON SCHRAGER Bloomberg

Rule 1 of inflation reports is never to read too much into one report, but there have now been several months of fairly low inflation, so it seems safe to call it: The Fed did its job. Pandemic inflation is over.

Note that I do not say, "Inflation is over." Between tariffs and lower immigration, higher inflation is likely. But even if the next inflation report shows a big uptick, this week's is an important marker. It bolsters the Fed's credibility, showing that it is capable of fulfilling its mandate — and it gives the Fed more policy options if inflation returns.

Inflation has stabilised at a higher yet still tolerable level. Every inflation report this year has been fairly moderate — averaging just above a 2% annual rate.

In my book, five months makes a meaningful trend. Meanwhile, despite a federal funds rate of between 4.25% and 4.5%, the labor market is in fairly good shape and GDP is healthy. There are a few spots of weakness, but unemployment appears to be hovering at about 4% — which is probably its natural rate. From the Fed's perspective, this is a good economy.