- Policy is well positioned for what lies ahead
- Sees tariffs as a one-off price adjustment, not spilling into broader inflation
- Sees inflation at 2.5% in 2026 and 2% in 2027
- Projects jobless rate will come down over the next few years
- Expecst 2026 GDP to hit 2.25%, well above 2025 rate
- Labor market risks have risen as risks to inflation have eased
- Fed policy has moved towards neutral from modestly restrictive
There isn't any kind of strong signal here but note that the market is seeing a nearly 25% chance of a January rate cut, with two cuts full priced in next year and a 33% chance of a third.
More:
- Uncertainty over tariffs has fallen quite a bit
- Fed baseline forecast is for 'a pretty good outcome'
- Gradual cooling in job market points to modestly restrictive mon pol
- Inflation is still too high
