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Fed's Inflation Tolerance
- The Federal Reserve seems to be tolerating inflation above 2%.
- They are willing to cut interest rates even if inflation hasn't reached the 2% goal.
Fed's Data Dependency
- The Fed's data dependency is questioned, as they hiked rates despite improving inflation.
- Their data dependency seems to be flexible, applied more as they approach the terminal rate.
Soft Landing vs. Inflation
- The Fed removing recession as the base case is surprising given potential inflation risks.
- A scenario with 4% unemployment and 4% inflation in 2024 would put the Fed in a difficult position.