Powell’s Ideal Economy

Executive Summary: What would it take for the Fed to abandon its hawkish stance? Three things, suggested Fed Chair Powell’s recent Jackson Hole speech: core PCED inflation dropping closer to 2% y/y, demand for labor dropping closer to the supply of it, and consumer spending cooling off a bit. All that can happen without a recession, as it has twice before in recent history, and the latest data on all three parameters suggest progress in the right direction. … Today, we review the data showing rebalancing of the labor market, slowing consumer spending, and moderating inflation. … Dr. Ed also reviews “The Crowded Room” (+).