Forward Guidance The Fed Is Fueling A New Inflation Wave | Danny Dayan
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Jul 30, 2025 In this discussion, Danny Dayan, a global macro hedge fund expert, explores how the Fed's approach may be fueling a new wave of inflation. He reveals the breakdown of traditional rate transmission mechanisms and the impact of immigration and tariffs on the labor market. Dayan warns of a structurally weaker dollar and a potential 'doom loop' dynamic. He shares his portfolio strategies while highlighting the challenges of interpreting contemporary macroeconomic data and the need for the Fed to adapt to changing financial conditions.
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Strong Q1 GDP Amid Uncertainty
- U.S. Q1 nominal GDP was strong at 5.8% excluding trade and inventories noise.
- Unusual policies caused a positive growth impulse but also increased uncertainty and volatility in Q2.
Immigration Shrinks Economic Capacity
- Immigration changes raised potential growth temporarily to 3%, now dropping back to 2% due to border restrictions.
- The labor supply shrinkage constrains economic capacity and complicates Fed policy decisions.
Fed Policy Not Yet Restrictive
- The Fed's dual mandate and financial conditions indicate policy isn't actually restrictive now.
- Traditional rate hike impacts on debt servicing haven’t appeared, signaling an unusual monetary transmission cycle.