I just finished installing my shower escutcheon but am unsure of how to seal around the inner hole. Here's a picture
There's a flimsy foam seal in there but I don't feel good about relying on that. How should I seal around this? Caulk?
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Clear silicone caulk, the tub/bath type with mildew inhibitor, will hold up the best.
You need to be aware that doing this will complicate future access for maintenance, as the caulk will have to be mechanically removed to change out the valve cartridge. That type of cartridge will require replacement eventually (5 to 10 years, more or less, depending on water quality and frequency of use).
The way the knob covers the assembly will generally prevent direct water spray on the area and the foam seal on the escutcheon does a pretty good job of preventing water intrusion. I never caulk this area on Moen valves.