The Federal Reserve's fight against inflation is nearing the end — policy shift amid economic pressure

2026-02-22 15:06:25

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Russell Investment’s senior investment strategist pointed out in a recent report that the Fed’s final push to control inflation is approaching. Although the banner of complete victory has not yet been truly raised, the finish line is clearly in sight. This judgment is based on a systematic analysis of the current economic landscape: pressures across multiple sectors are simultaneously easing, laying the foundation for a final stabilization of inflation.

Real Estate and Tariffs: Double Relief from Inflationary Pressures

The ongoing downturn in the U.S. real estate market is effectively acting as a cooling measure. As a significant factor influencing inflation, the sluggishness in real estate activity will help prevent further upward pressure on prices. Meanwhile, the tariff-related effects that have been troubling the market are beginning to show signs of fatigue. As we move into the second half of the year, this external pressure is expected to gradually weaken, creating conditions for a decline in overall price levels.

Labor Market Balance and Service Inflation in a Controllable Range

The gradual balancing of the labor market is producing a noticeable deflationary effect. As supply and demand stabilize, the price increases in the service sector will struggle to sustain their previous strength. This structural improvement means that the most “sticky” service inflation is finally beginning to loosen, injecting new momentum into the overall inflation outlook.

Steady Economic Growth and a Positive Inflation Outlook

Although economic growth may remain at trend levels or even slightly stronger, this does not mean inflationary pressures will resurge. On the contrary, the combined effects of multiple factors are shaping a new equilibrium—while the economy maintains resilient growth, inflation is expected to stay well-controlled over the next one to two years, transitioning smoothly from high fever to stability. This has important implications for market stability and investor confidence.

From this perspective, the Fed’s long-term battle against inflation is now approaching a critical night before the finish line.

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