Welcome back to KPA Wealth. — Today we’re looking at two headlines shaking things up: the Fed is split over rising tariff-driven inflation just weeks before its next rate decision, and Elon Musk’s xAI is throwing serious firepower at OpenAI with Grok 4—a new model so confident it costs $300 a month

• Tariff Inflation: Why the Fed Is Divided and What It Means for You

• Grok 4 Could Be the ChatGPT Alternative I’ve Been Waiting For

• Today’s Mortgage Rates

Tariff Inflation: Why the Fed Is Divided and What It Means for You

What Musalem Said and Why It Matters

St. Louis Fed President Alberto Musalem recently raised a red flag about tariff-driven inflation. He said it could take until the fourth quarter of this year—or even early 2026—to understand whether current tariffs are causing temporary price hikes or something more lasting. According to him, the average tariff level has risen from 2.5% in April to about 8–9% in June. Depending on future trade policy, it could climb into the low teens or twenties.

This isn’t just abstract economic theory. I’ve seen these price increases firsthand. Last year, I helped a friend renovate his workshop, and we both noticed how steel and aluminum prices had jumped, even though the news cycle was still downplaying inflation risks. That personal experience helps me understand how Musalem’s warnings might play out in everyday life.

The Fed’s Internal Divide

Musalem’s remarks highlight a growing divide within the Federal Reserve. Some members, like Governors Michelle Bowman and Christopher Waller, believe inflation from tariffs will be short-lived. They’re pushing for interest rate cuts as early as the Fed’s upcoming July 28–29 meeting. This likely wont happen, and the Fedwatch shows a 6% chance of a rate cut. Again, not gonna happen this month.

Fed Chair Jerome Powell and Musalem are urging patience. Powell has emphasized that the strength of the economy gives the Fed room to wait and see how inflation unfolds. It’s important to remember that core inflation (which excludes food and energy) has been hovering between 3% and 3.5%, well above the Fed’s 2% target for more than four years now.

As someone who monitors Fed meetings closely, I can tell you this kind of split isn’t new, but it’s usually a sign of a deeper uncertainty in the data.

What the Data Is Telling Us

Let’s take a look at the numbers. The core Consumer Price Index (CPI) has been increasing at a rate of about 0.2%–0.3% monthly. Meanwhile, the Fed’s preferred inflation measure—the core Personal Consumption Expenditures (PCE) index—rose 0.3% in May, bringing the year-over-year number to around 2.6%.

That doesn’t sound dramatic, but when inflation is stubbornly high, even small increases can delay or derail planned rate cuts. A few months of 0.4% increases in core CPI or PCE would likely push the Fed further into “wait and see” mode.

Why It Hits Consumers and Investors

The effects of tariffs don’t just show up in trade stats—they impact daily life. When tariffs target intermediate goods like steel and copper, the costs ripple through manufacturing, retail, and construction. That means higher prices on everything from cars to furniture to canned food.

For consumers, this could mean budgeting for more expensive groceries and materials. For investors, it could mean volatile stock markets, especially in rate-sensitive sectors like real estate, technology, and utilities.

And for anyone thinking about borrowing—whether to start a business or buy a home—higher interest rates for longer can significantly change your cost projections.

Looking Ahead: What Will Change the Fed’s Mind

So what’s next? All eyes are on the summer and early fall inflation reports. If the data shows sustained upward pressure on core prices, especially beyond 0.3% per month, the Fed will likely delay any rate cuts until 2026. On the other hand, if inflation cools to around 2.3%–2.4% year-over-year and expectations stay stable, the door to cuts may open later this year.

Musalem also warned about “second-round effects”—essentially, the fear that once inflation expectations become embedded, they’re hard to reverse. That’s why watching not just the CPI and PCE, but also sentiment surveys and wage data, is so critical.

My Take

I’m personally in the camp that says we need to be cautious. There’s too much uncertainty in the data to rush into rate cuts. Inflation has been sticky, and the ripple effects from tariffs might not show up until late summer or even early fall.

That said, the Fed should stay flexible. If inflation eases quickly and consistently, rate cuts could be appropriate later this year. But until the data makes that case clearly, patience is probably the smarter path.

If you’re a consumer, business owner, or investor—my advice is to keep a close eye on inflation reports and plan for rates to stay elevated a little longer. Better to be prepared than surprised.

Grok 4 Could Be the ChatGPT Alternative I’ve Been Waiting For

Lately, I’ve found myself getting tired of ChatGPT. It has become a little too cautious, sometimes frustratingly vague, and not always helpful when I need clear, direct answers. So when Elon Musk’s xAI announced Grok 4 and introduced the ultra-premium $300-per-month SuperGrok Heavy, I couldn’t help but wonder if it’s time to switch things up.

Grok 4 is already making waves. Musk claims it outperforms PhD-level knowledge in every subject, and early benchmark tests back that up. On Humanity’s Last Exam, it beat both Google’s Gemini and OpenAI’s o3 model. The “Heavy” version goes a step further by running multiple AI agents in parallel and having them compare answers, kind of like an AI-powered study group. That level of processing might be exactly what ChatGPT has been missing lately.

If Grok can offer better insights, clearer answers, and real time savings, maybe the cost is just the price of staying ahead. It is expensive, but if it works, it might actually be worth it.

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Kyle Allgair
CEO of KPA Wealth
📞 (279) 977-8149 | ✉️ [email protected]
🌐 KPAhomeloans.com

Kyle Allgair is the CEO of KPA Wealth, and is continuously helping clients build wealth through real estate and strategic financial planning. Contact him for personalized advice on achieving your financial goals.