The Federal Reserve (Fed) is choosing to lower interest rates despite the fact that inflation remains elevated and prices continue to rise. The article explains that the Fed faces a complex balancing act: while price pressures are still persistent, signs of a slowing labour market and softer growth are giving the central bank room to provide relief without immediately undermining its inflation-fighting credibility.
In practical terms, the Fed is betting that the risk to employment or economic momentum may now outweigh the risk of inflation rising further — especially given that many elevated prices are tied to one-time shocks (such as supply chain disruptions or tariffs) rather than a full-blown inflation spiral. The move reflects a strategic shift: rather than waiting until inflation is fully tamed, the Fed appears more comfortable maneuvering with tighter variables while focusing on ensuring the economy doesn’t tip into recession.