In an economy that has consistently outperformed and is constantly being scoured for cracks, it’s hard to find any faults in the latest data.
Already a subscriber?Reasonable people can disagree about whether US disinflation is actually stalling and what it might mean for Federal Reserve monetary policy. But it’s getting much harder to deny the underlying strength of the economy, suggesting central bankers can afford to wait before reducing benchmark interest rates.
The developments come amid subtle signs of disagreement on the Fed’s rate-setting Federal Open Market Committee when it comes to the interpretation of recent inflation reports. Sounding slightly more concerned, Fed governor Christopher Waller said Wednesday that it may now be necessary to hold the policy rate “” to keep inflation heading toward the central bank’s 2 per cent goal. He also suggested that the 275,000 jobs added to US payrolls in February may be “a sign that demand is not moderating as much as is needed to support continued progress on inflation”.
But there’s no need to jump to premature conclusions. Policy choices will only get hairy if Powell and I are proved wrong and the inflation remains stubbornly elevated for months more, extending the rate-cut waiting game into autumn or beyond. And while the macro data is strong today, there are plenty of areas of vulnerability across the interconnected global economy.
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