Economy Grows Steadily While Inflation Moderates Amid Tight Monetary Policy
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The economy grew at a 4.9% annualized rate in Q3, beating expectations but not indicative of runaway growth.
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Inflation has been steadily declining, with the GDP deflator down to 3.2% and core PCE at 2.3-3.2%.
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Tight monetary policy has brought down inflation expectations to about 2.3%, near the upper bound of the Fed's target.
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Real interest rates have surged over 340 basis points in the past 18 months, reflecting the Fed's tight stance.
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If economic growth remains around 2.2%, real yields could decline significantly from current elevated levels.