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- Inflation remains somewhat elevated; the inflation of goods accelerated due to tariffs.
- Long-term inflation expectations remain close to 2%.
- The labor market is softer; employment growth has likely been overestimated by ~60k in recent months.
- The economy is not overheating.
- The Fed will make decisions meeting by meeting; policy does not follow a predetermined path.
- Interest rates are within a plausible neutral range.
- The Fed is buying short-term Treasury bonds to support the stability of the money market.
- Repo operations remain important; reserve levels are sufficient.
- Spending on AI-related data centers supports investment.
- Goods inflation is expected to peak in Q1 if there are no new tariffs.
- Tariffs are the main driver of the increase in goods inflation.