Investing.com -- The U.S. Federal Reserve may struggle to justify a more dovish stance on monetary policy even if oil prices retreat following an easing of tensions in the Middle East, as persistent underlying inflation pressures remain entrenched.

According to a new analysis from CIBC Capital Markets' (CIBC) economist Helen Lao said the biggest challenge for new Fed Chair Kevin Warsh will be bringing down so-called "supercore" inflation — core services excluding housing — which accounts for more than half of core personal consumption expenditures (PCE) inflation and continues to run at about 3.5% annually, well above levels consistent with the Fed’s 2% inflation target.

Core inflation has hovered around 3% since 2024 despite broader disinflationary trends. According to the report, healthcare and financial services have become the largest contributors to persistent supercore inflation. Healthcare costs are being supported by multi-year pricing contracts, while financial services inflation has risen alongside strong equity market performance. These factors have offset moderation in other service categories.

CIBC noted that wage growth remains above 3% annually, reinforcing service-sector price pressures. While lower oil prices could reduce transportation-related costs such as airfares, those categories carry relatively small weights in inflation calculations and are unlikely to materially change the broader inflation picture.

The report also cautioned against relying too heavily on the Dallas Fed’s Trimmed Mean PCE inflation measure, which Warsh highlighted during his Senate confirmation hearing. CIBC argued that the measure currently understates underlying inflation because its methodology removes a larger share of categories experiencing sharp price increases than those seeing large declines. With tariffs and energy shocks skewing price gains toward the upside, the trimmed measure may be painting an overly benign inflation picture.

While easing shelter inflation and the eventual fading of tariff-related price effects should help moderate inflation over time, CIBC said achieving the Fed’s 2% target remains unlikely in the near term. The bank estimates that current contributions from core goods and supercore services alone are enough to keep core inflation near 3%.

Still, the report said the Fed could find room for modest rate cuts in 2027 if headline inflation falls sharply due to lower gasoline prices and if economic growth begins to soften. Signs that could support easing include a rising unemployment rate, slower growth in artificial intelligence-related capital spending, and elevated long-term interest rates that continue to restrain housing activity. Until then, persistent supercore inflation is likely to remain a significant obstacle for policymakers seeking to lower rates.