Tim Duy: Fed Interest-Rate Debate Misses the Bigger Picture: "The federal funds rate currently sits in a range of 1.75 percent to 2.0 percent. The median policy maker estimate of the neutral rate is 2.9 percent... the next rate increase widely expected to come Sept. 21...

...Talk of a pause is currently more about hope than reality. Incoming data remains far too strong for the Fed to contemplate an end to rate increases. Job growth continues at a rate the Fed believes will eventually be consistent with an overheated economy. And there is no reason to expect pressure on the labor market to alleviate anytime soon.... Moreover, there is internal pressure from Fed staff to keep boosting rates, and this pressure is likely grow. Contained inflation only goes so far in moderating policy tightening. It can hold the Fed to a gradual path, but won’t stop hikes as long as the economy expands at a pace well in excess of the Fed’s estimates. For the Fed to initiate a sustained policy pause, they will need a solid reason to believe that past rate hikes are sufficient to temper the pace of growth to more sustainable levels. We aren’t seeing that yet. Consequently, remember that whenever a Fed official looks to future and sees a specific end to rate hikes, that’s just a prediction and not a promise...


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