Posted 1/9/2024, 1:33:00 PM
Jobs Growth and Inflation at Targets Suggest Fed Mandates Met; Markets Bet on Rate Cuts Anyway
- Labor market is back in balance and job growth is slowing, indicating the Fed's mandate may be fulfilled
- Inflation as measured by PCE is already near 2%, also suggesting the Fed's inflation target is met
- Markets are pricing in aggressive Fed rate cuts due to views that the Fed's dual mandate is largely achieved
- Markets believe the appropriate Fed Funds rate is a "neutral" level given mandate achievement
- Markets see neutral as lower than the Fed's own estimates, driving expected cuts