Rates are now at neutral rate
Economy doesn’t need stimulus
Expects economy to continue growing above trend, boosted by fiscal policy
Expects inflation to decline to 2% but sees risk it could remain above
Further cuts only needed if jobs market were to decay or inflation falls

Hawkish stuff from Musalem and the market thinks Warsh is a hawk deep down. Are we slowly going to price out the Fed easing that’s in the market this year?

The market is pricing in 52 bps in easing through year end, which is a touch more than at the start of the week. We saw the GDP trackers fall after trade balance numbers but some other economic data has been a bit better, we’ve also seen oil prices rise substantially this week.

At the end of the day, it’s worth focusing back on the data as Warsh, Waller, Bowman and all the other newly-christened Fed doves are going to go where the numbers take them. Yes, they can continue to forecast falling inflation but if prices don’t fall or they start to rise then they can’t hold that position for long.

Next week, we get non-farm payrolls and some other top-tier data and that’s going to be telling.

Also keep an eye on the US dollar. It’s rebounded today after what had been a rough week. It’s still near the lowest levels in years and Trump this week basically endorsed US dollar weakness. The recent pain in the AI trade might also start to chase away some investment from US equity markets.