Recent job market trends that were observed before the government shutdown continue to appear intact. Current job market data indicates that interest rates could be set lower than their present levels.
It’s important to note that both the supply and demand sides of the economy matter when analyzing ongoing changes. Over time, there is an expectation of additional investment demand, which could help sustain economic growth.
However, increasing uncertainty surrounding tariffs poses a potential economic drag. If tariff income were to disappear, it would have implications for Federal Reserve policy. Despite these developments, views on the overall economy and monetary policy remain largely aligned with other officials.
Compared to many Fed officials, there is a more optimistic outlook on inflation, particularly as shelter-related disinflation is expected to ease overall inflation pressures. Nevertheless, Fed policy is currently viewed as too restrictive, and there are risks associated with maintaining such tight measures.
Barring any significant new information, it would be reasonable to consider cutting interest rates in December. The easing of inflation, especially in the shelter sector, provides additional reason to expect lower overall inflation in the near future.
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