Fed Policy Dilemma: Inflation vs. Cooling Labor Market

The Fed is grappling with persistent inflation (CPI 2.6%) and a cooling labor market (July jobs lost 23,000, downward revisions). New data: one-year inflation expectations eased to 3.6% in Fed survey, but medium-term still above target. Bond market recovery tested; ADP miss (44k) and ISM improvement create mixed signals. Markets see lower odds of September rate hike, but economists remain hawkish. Internal FOMC split evident. Tariffs, Iran conflict, and AI buildout cited as inflation drivers. Upcoming CPI data critical.