Fed Funds Rate

The Fed expects inflation will take longer to return to target, with upside risks reflecting recent firmer inflation and Trump policies.

The Fed should forecast fewer rate cuts given firmer inflation, resilient economic growth, and the inflationary impact of Trump policies.

The Fed hopes it can achieve a soft landing, lowering the policy rate to around 3%, broadly matching its estimate of the neutral rate.

Soft landings are exceedingly rare in the US and the 1990s episode marks the only example of a successful soft landing.

The US unemployment rate has edged above most estimates of the NAIRU for the first time since 2021, supporting a Fed rate cut next month.

Measures of new rents are giving conflicting signals on the outlook for housing costs, which are a key driver of inflation.

Market measures of expected inflation have picked up, which is unusual this late in the cycle.

US inflation and wages growth have peaked, but remain uncomfortably high for the Fed.

Its policy rate is well below the Fed’s. That can’t last: the RBA can’t indefinitely fight and must ultimately follow the Fed.

US wages growth is still rapidly accelerating with the employment cost index up about 4½% over the past year, which is the fastest growth since 2000 and 1991 before...