IS 3% THE NEW 2% FOR U.S. INFLATION? Wolfe Research says markets view recent hotter inflation readings as temporary, with CPI, Core CPI, PCE, and Core PCE all near or above 3% YoY. Investors expect falling housing costs to offset tariff-driven price increases, keeping inflation from drifting higher. CPI has averaged 2.9% since 1983, suggesting a 3% rate is consistent with history, even if the Fed’s official target remains 2%. Wolfe argues that unless inflation accelerates more persistently, labor market trends—not inflation—will drive Fed policy and markets in the months ahead.(*Walter Bloomberg)