Fed moved to slowly to combat inflation in pandemic
There’s a lot of blame to go around for pandemic inflation surge
Services inflation not yet under control
Best thing about recent inflation data shows possible waning of tariff impact
Expects to see Fed rate cuts this year, but needs data to affirm outlook
Rates can still go down a fair amount but need firm evidence of inflation retreat
The most important thing facing Fed is need to get inflation back to 2%
There is still strength in jobs and overall growth is good
Data points to stability in job market
I’m not surprised by low claims data
If you try to take away the independence of the central bank, you will get inflation roaring back

The Fed has settled comfortably into the sidelines as they evaluate the economy and wait for inflation to fall convincingly towards 2%. Today’s initial jobless claims number prompted the comment in the headline from Goolsbee as claims were at 198K compared to 215K expected and 208K a week ago. It’s the ‘low hiring, low firing’ economy that’s persisted for awhile and is increasingly static. With GDP growth likely around 2.5% this year, there is no big incentive to let workers go.

At some point, there will be that pressure and AI will allow for productivity gains but we don’t appear to be crossing that threshold in a rush. So the Fed will wait and likely resist pressure from Trump to cut for at least awhile. Pricing for a January cut is under 10% and it’s a 24% for a March cut.

The first meeting that’s really in play is April but it’s down to just 39%. That means the next cut may fall to the future Fed chairman at the June meeting. The name of that chairman is something we could find out within days. The betting market has Kevin Warsh slightly ahead of Kevin Hassett but both are likely to be Trump lackeys. That will set up a showdown between the chair and the board.