🚨 The Federal Reserve is already mired in the most difficult predicament in history,

and there’s no going back.
The recently released US CPI data shows a situation far more severe than expected.
The inflation rate has surged to 3.3%, the highest level since May 2024;
Core CPI has risen in tandem to 2.6%, the highest level since 2026.
As the first key inflation report of the year, it has already sent a clear signal:
Inflation is spiraling out of control.
The market had already sharply cooled expectations for rate cuts in 2026,
and this data has almost completely shut the door on easing.
But the real trouble doesn’t stop there.
The other side of runaway inflation is that the underlying economic fundamentals continue to weaken:
soft GDP growth, mounting pressure in employment, stress in the private credit market, and a continued slump in the real estate market.
This means the Federal Reserve is falling short of two core missions at the same time.
It is targeting 2% inflation and stable employment around 4%,
but now both indicators have diverged and deteriorated in tandem.
Letting one go to save the other will make the other collapse.
Even more worrying is that the energy shocks haven’t fully shown up yet.
The situation in the Strait of Hormuz remains tense; further risks are still building up, and conditions will only worsen further.
Unlike in 2020 and 2023, this time the Federal Reserve may be powerless.