AART Inflation Quarterly Q1 2025

Key takeaways

The U.S. inflation rate has moved sideways near the 3% level, and we’ve seen an increasing risk of inflation ticking higher in the second half of 2025, due to the lagged effects of real wage gains and easier monetary policy.
There have been a few signs of better disinflationary trends in services, although these have been offset by reflationary goods prices.
Sticky inflation near 3% may make outsized gains and portfolio diversification more difficult, although it doesn’t have to portend poor results for financial markets, as we’ve seen stocks do well in similar situations in the past.