- The Fed is happy for markets to put some stock in the notion that the Funds rate will be lower at the end of the year
- The centre of gravity at the Fed doesn't think they will cut in March and won't cut soon
- to my mind, I think they're gonna keep their powder dry for a couple of meetings, probably extends, you know, past mid year, you know, past the June meeting.
- PCE inflation has averaged 2% inflation over six months, which is really good but they need that over 12 months
- They're going to keep their powder dry for a couple of meetings, I think,
- it's not obvious from the data that where they want to end up in a year or two is 200 basis points below where they are now or 150
- you've still got super core services, very, you know, labor intensive sectors that are not at 2% and not consistent with 2%.
- Goods and services inflation need to meet eventually but it's not clear if that's at 2% or 3%
- The Fed has to put some weight on the idea that they haven't hiked enough, in part because employment is so strong
- This year we're supposed to be going into a recession but so far we're chugging along
- The number one hypothesis I think is that the Fed hasn't tightened policy enough
- One thing you see is that if the fiscal authority is running a bigger deficit, if there's more fiscal stimulus, the real rate is going to have to be higher.
- commercial real estate is sort of the obvious candidate for what else could go wrong.
- unless like initial unemployment claims double in the next five weeks, they're not going to cut rates in March
Lacker has always been a hawk so his comment about waiting until after June isn't a big surprise but he makes some good points. The comments came in an interview with Kathleen Hayes. Watch it here.
