I see. Yeah, I don’t disagree that inflation is better, but it is certainly not a non-issue. Imagine what happens if the Fed dropped interest rates (rather than simply pausing them at the current rate). The point I was making relative to inflation is that the traditional playbook for responding to a contraction is difficult to picture given the macro environment. My guess is that even Kevin Erdmann would agree with that.
I disagree. The macro environment is good enough that the Fed could easily handle any contraction, provided they focus on forward looking indicators, such as the TIPS spread, or near-realtime indicators such as the ISM purchasing manager numbers.
Now seems like a good time for the Fed to start decreasing interest rates.
On inflation, see Kevin Erdmann (also here).
I see. Yeah, I don’t disagree that inflation is better, but it is certainly not a non-issue. Imagine what happens if the Fed dropped interest rates (rather than simply pausing them at the current rate). The point I was making relative to inflation is that the traditional playbook for responding to a contraction is difficult to picture given the macro environment. My guess is that even Kevin Erdmann would agree with that.
I disagree. The macro environment is good enough that the Fed could easily handle any contraction, provided they focus on forward looking indicators, such as the TIPS spread, or near-realtime indicators such as the ISM purchasing manager numbers.
Now seems like a good time for the Fed to start decreasing interest rates.