
 Notes on the Week Ahead
 Notes on the Week Ahead Truth or Consequences: The Fed’s Next Move
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 Sep 15, 2025  This discussion dives into the complexities of predicting the Federal Reserve's interest rate moves amidst inflation and unemployment pressures. Listeners learn about the cautious strategies investors should consider, as market expectations shift. The conversation also unpacks key economic indicators like GDP growth and inflation rates, highlighting the importance of adapting investment approaches in response to these forecasts and the ever-evolving political landscape. 
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Prudent Economist Rule
- David Kelly uses the "prudent economist rule" to predict Fed moves by asking what a prudent Fed banker would do with reasonable forecasts and mandates.
- He warns this breaks down if political pressure or job security influences decisions.
Market Cuts vs Fed Forecasts
- Futures markets expect a 25bp cut Wednesday with more cuts later this year and in 2026, and Kelly largely agrees.
- He cautions that market expectations may conflict with the Fed's own economic forecasts and policy rule.
Fed Dropped Balancing Language
- The Fed's July statement dropped language about balancing inflation and employment gaps, which may signal impending policy inconsistency.
- Kelly suggests the Fed might be preparing to violate its earlier decision rule.
