Bloomberg Talks Bill Dudley Talks 2017 Tax Cut Extension
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Dec 13, 2024 Former New York Fed President Bill Dudley discusses the implications of extending the 2017 tax cuts and how the Federal Reserve incorporates such policies into its forecasts. He highlights the complex interplay between tax cuts, tariffs, and their unpredictable effects on inflation and growth. Dudley also delves into expectations for future interest rate adjustments, considering inflation's role and market sentiments toward monetary policy changes.
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Fed Forecasting Assumptions
- The Federal Reserve makes assumptions about policy changes when forecasting, despite claims otherwise.
- They consider factors like size, likelihood, market pricing, and clarity when incorporating assumptions.
Uncertainty in Policy Forecasting
- Tariffs and immigration policies are difficult to forecast due to uncertainty about their size, duration, and impact.
- Tax cuts are easier to incorporate because they're clearer and already priced into markets.
Tariff Impact Assessment
- In 2018, the Fed viewed Trump's initial tariffs as a minor one-time impact.
- Current tariffs are much larger, impacting a significant portion of imports from China.