CPI still rising at about 5%

 Services excluding energy, which are particularly sensitive to labor costs, are rising about 7%.

The president’s infrastructure, industrial polices and other initiatives have increased federal spending to $6.4 trillion this year from $4.5 trillion in 2019, when the U.S. economy was at full employment,

This creates more demand for goods and services than the economy can produce, and whatever is achieved through the debt-ceiling negotiations will not substantially reverse this huge jump.

Powell has said the Fed is committed to staying the course to get inflation down to 2%, but he also has repeatedly indicated he wants to accomplish a soft landing for the economy. Achieving both requires considerable navigational skills.

Consumers, businesses and the bond market evidently agree: To save the U.S. economy from a recession, Powell will accept considerably more annual inflation than 2%.

Peter Morici MarketWatch 30 May 2023

https://www.marketwatch.com/story/pausing-rate-hikes-would-saddle-americans-with-much-higher-inflation-than-the-feds-2-target-95812f46

The neutral interest rate is 6% - much higher than Fed policy makers admit

Peter Morici MarketWatch  30 November 2022 

https://englundmacro.blogspot.com/2022/11/the-neutral-interest-rate-is-6-much.html

Another relevant economics paper is Akinci et al. on “the financial stability interest rate” (which they call r**, not to be confused with r*, the neutral interest rate) — the threshold interest rate above which the central bank triggers a problem of financial stability.

Niall Ferguson Bloomberg 18 december 2022 

https://englundmacro.blogspot.com/2022/12/the-threshold-interest-rate-above-which.html