- Fed policy is restrained but it may take some time to bring down inflation
Recent comments by Daly (et al.) might say: “We have no idea what's going on, we're just monitoring the data like the rest of you.” There is a huge amount of money to be made who first knows whether we are in a low inflation or flat inflation regime.
more:
- If the labor market falters “fundamentally,” policy action will be needed
- We see the job market cooling but that's what should happen
- The weak labor market would return to normal
- We continue to see inflation falling, and things are undoubtedly slower than last year
- We continue to see supply improving, and there is no evidence that the Fed has to push the economy down
So there's going to be a real question about what the underlying default is. Powell hinted at the unemployment rate rising “by a couple more” when it was at 3.8% (dot chart at 4.0% at year-end). 4.2% would certainly get the ball rolling, but even at 4.1% with some negative momentum that would push them to cut or at least promise to cut soon.