The Fed Ahead

We expect that Wednesday’s FOMC decision will be to maintain the federal funds rate at its current high level, where it’s been for nearly a year. Today, Eric discusses the higher-for-longer phenomenon, including why this tightening cycle has defied both historical precedent and expectations just six months ago. The economy’s resilience combined with labor market and inflation conditions argue against lowering rates now; doing so might incite a stock market meltup (and subsequent meltdown). … While the Fed typically leads other central banks in interest-rate moves, there are good reasons it’s lagging in easing this time. … We don’t buy the theories of monetarists that M2 matters vitally to inflation or the stock market.