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So… What Now?
Needless to say, the US rates complex reacted -- and I'm searching for the right word here -- energetically, to Friday's jobs report.
The release was a barnburner on every line that counted. Both during last month's press conference and during remarks in Nashville this week, Jerome Powell variously insisted the Fed's not in a rush. If September's CPI report, due in less than a week, comes in warm, the Committee will have to prove it, where that means starting to talk STIRs into coin-toss territ
There was an interesting tell in both the one Harris-Trump debate (I hope there’s a second, but I’m not expecting it. Trump’s afraid to debate a woman again), and the Walz-Vance VP debate. When inflation was the subject, three of the 4 debaters (Trump was the exception) jumped on the point that, paraphrasing, “Housing cost is what’s driving inflation right now.” It’s clear that the economists advising both campaigns are saying some version of, “inflation has been tamed except for housing; housing costs are what is driving inflation right now.” The price of groceries and gas get perfunctory nods, but when the memorized inflation monologues come out, top billing goes to housing costs.
Perhaps that seems off-topic… I bring it up because it’s highly indicative of what inside-the-beltway Professional Economists (with a capital P & E) are thinking, and that’s going to have a potentially disproportionate impact on the thinking of Powell & his band of merry folks.
Well, they couldn’t very well say “wages is what’s driving inflation right now”.
When one claims to be data dependent, it seems like one should take actions based on the data.