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Bob Elliott's avatar

Looks like about half committee is with me already in the no cuts for '25 camp. Suspect the camp will expand as tariff-related inflation pressure flows through and the UE rate remains artificially depressed due to low labor supply.

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Henry Peabody's avatar

Completely agree. I believe many are too rooted in recency bias and “r-star” estimates that are based on a different cohort of data (ie pre Covid). None of us know what neutral is and with the balanced risks, the best move is no move.

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Bob Elliott's avatar

Getting an understanding of r* today is best done empirically rather than relying on various models. For instance at current rates the UE rate has been flat for almost a year and inflation relatively stable modestly above the Fed's target. That would suggest we are roughly at neutral when it comes to monetary policy.

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Henry Peabody's avatar

Well said

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