Federal Reserve officials believe inflation can decline toward the central bank's 2% target without a significant rise in unemployment, provided businesses expect price pressures to ease and moderate their price increases. The Personal Consumption Expenditures Price Index, the Fed's preferred inflation gauge, stands at 3.7%, while unemployment is 4.1% and wage gains remain moderate. The strategy places greater weight on anchored inflation expectations and receding tariff and energy shocks than on sharply reducing demand, challenging the traditional Phillips curve relationship between inflation and unemployment. Officials acknowledge that persistent supply disruptions, stronger demand or artificial-intelligence investment could eventually require weaker consumption, investment and employment. Fed projections show PCE inflation remaining above target through 2029, with one additional quarter-percentage-point increase projected this year, while investors expect three more increases through the next five meetings through April.