- If US unemployment rises to 4.5% that would still be healthy
- Fed is certainly sensitive to global developments and impact on US financial stability
- Inflation will start to come down in 2023 but how fast is uncertain
- Long and variable lags less common now due to Fed transparency
- Other central banks will have to react to Fed's intentions
- Fed is having to raise rates pretty rapidly to get to a minimally-appropriate level in order to tackle inflation
- US has to get get to the right policy level, after that it can adapt more-normally to incoming data
Abandoning the idea of 'long and variable' lagging impacts on the real economy is a potentially-dangerous mistake.
The thing about reacting 'more normally' is that 14-months from now -- if the Fed follows the path it's laid out -- then we'll have a very weak economy and high rates. Reacting 'more normally' would mean cuts to sub-2%.