Haha, I actually did my best trying to highlight my uncertainty by combining several uncertainty-increasing words in one sentence like âunqualifiedâ, âseemsâ, and âfirst impressionâ.
Overall I am as well not sure at all about the Feds path as I am not totally aware of how they take decisions and I have certainly knowledge gaps and missing data points I am not taking into account as of now which they are considering.
From my take of the situation with weakening demand signals appearing
and inflation and production dropping
I now start to see a situation in which financial conditions are more than accurately tight to slow down the economy and there is a risk appearing that the Fed might overdo it, especially considering risks to regional banks etc.
One of the last obvs. remaining hawkish factor which the Fed and we need to watch evermore closely is the labor market. If I had to guess I would assume that the first signs of easing should finally appear towards the end of the year.
If the labor market does not ease it could put the Fed into a difficult position, but if it does I have some level of trust in the Fed that it would mainly consider m/m changes and the real situation on the ground and will change itâs stance on âignoring lag effectsâ. (which might have been an excuse to hike more)
I completely agree that the Fed wants to keep rates high as long as possible to eliminate any remaining inflation dangers. We should not completely rule out one or multiple emergency cuts at one point though.