On Sticky Inflation& Robust Consumers

What if the Fed continues to cut the federal funds rate despite the strength of the economy? What’s that going to do to inflation? Today, Eric explains that a second wave of high inflation isn’t likely given expectations for a productivity growth boom that holds down unit labor cost inflation. But a legitimate worry is that inflation expectations could rise, keeping long-term bond yields elevated and eroding confidence in the Fed. … Also: Consumer spending has been strong, buoyed by growth in real wages as well as several sources of nonlabor income. We expect even stronger consumer spending up ahead.