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On Investing

With Stubborn Inflation, What Should the Fed's Target Be? (With David Beckworth)

Apr 12, 2024
Economist David Beckworth discusses nominal GDP targeting as an alternative to inflation-focused monetary policy. They explore the benefits, challenges, and historical context of this approach. The hosts also analyze the impact of higher CPI data on bond markets and Fed policy, highlighting the importance of following nominal GDP for economic health indicators.
40:35

Podcast summary created with Snipd AI

Quick takeaways

  • Higher CPI challenges Fed rate cut expectations, necessitating patience in monitoring inflation trends.
  • Nominal GDP targeting provides a direct approach to managing total dollar spending, enhancing central bank policy effectiveness.

Deep dives

Impact of March CPI Data on Market Reactions and Fed Policy

The much anticipated March CPI data revealed a rise of 0.4%, leading to a year-over-year gain of 3.5%. Key sectors like housing, clothing, and transportation services saw significant increases, influencing market reactions swiftly. Bond market reactions resulted in two-year yields surging, indicating a shift away from expectations of a June rate cut. This challenges Fed policy outlook as the inflation trend defies hopes for further decline, prompting a need for patience and potential minimal rate cuts.

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