Bloomberg Surveillance Reacting to the Fed and Uncertainty in Washington
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Dec 19, 2024 
Frances Donald, Chief Economist at RBC, breaks down the Fed's recent decisions and the labor market's strength. Danielle DiMartino Booth, CEO at QI Research, tackles the implications of Fed actions on the market. Political analyst Wendy Schiller discusses looming government funding negotiations. Lisa Mateo highlights current retail trends amid economic uncertainty. The conversation navigates through the complex interplay of monetary policy, fiscal challenges, and political dynamics that shape the economic landscape.
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Fed Policy Shift
- The Federal Reserve's policy outlook shifted significantly based on recent inflation data.
- This suggests they are internalizing expectations of future policies and are concerned about inflation.
Inflation Impact
- Current inflation represents a substantial price level shock for many Americans.
- Tolerance for higher prices is lower now due to the magnitude of recent increases, exceeding 30% since Trump took office.
Neutral Rate Uncertainty
- The neutral interest rate, neither tightening nor easing the economy, is uncertain due to several factors.
- These factors include substantial government spending, uneven economic performance across sectors, and the impact of AI and productivity growth.