James Bullard just gave a presentation in China: “Slow Normalization or No Normalization?”. The conclusion:
- The FOMC median projection for the policy rate suggests a gradual pace of rate increases over the next several years.
- The market-based expectation for the FOMC policy rate is much shallower, implying only a few increases over the forecast horizon—almost no normalization.
- US. evidence from labor markets, actual inflation readings and global influences suggests the FOMC median projection may be more nearly correct.
- US. evidence from recent readings on GDP growth and market-based inflation expectations suggests the market view of the path of the policy rate may be more nearly correct.
Ladies & Gentlemen, place your bets!
PS Note how monetary policy has been downgraded to establishing a “normal” level of the FF rate. And by “devine coincidence” that “normal” level will provide the “target” rate of inflation. It´s a double “reasoning from a price change”!