The Macro Minute with Darius Dale Will the intensifying debate over the level of r-star disrupt timing Fed liquidity?
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Dec 2, 2025 Darius delves into the Fed's contentious R* debate and its potential to delay liquidity. He analyzes the recent market volatility and the implications of diverging neutral rate views among Fed officials. The discussion highlights the K-shaped economic recovery's impact on low-income groups, posing challenges for monetary policy. Darius also emphasizes the importance of financial literacy, suggesting strategies for parents to teach investing to their kids while advocating for social change in the financial landscape.
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R-Star Debate Raises Liquidity Friction
- The Fed's internal disagreement over r-star raises friction for timely liquidity provision.
- A wider dispersion of neutral rate views makes further cuts politically and analytically harder.
Up-Crash Amplified Market Volatility
- Markets remain volatile after a recent up-crash that reversed much of short sellers' gains.
- That volatility can act as a catalyst to pressure the Fed for liquidity but timing is uncertain.
Wide Fed Projections Complicate Signaling
- Fed projections showing 11 neutral rate estimates across officials complicate policy signaling.
- As policy approaches the upper bound of those estimates, cutting becomes harder to justify politically.