This means the Fed needs to cut interest rates. Normally, the Fed cuts interest rates because economic activity is slowing sharply. Rather, they are mulling whether softening inflation means real interest rates will be unnecessarily restrictive if they don’t act. Concerns that lower inflation will raise real rates are misplaced because it will also boost purchasing power, consumer confidence and spending, said Maki. “You should be able to cut interest rates quite rapidly if that scary 1970s dynamic isn’t happening, and it isn’t happening," he said.

Source: Mint January 28, 2024 12:36 UTC