Inflation's Evolution Reflects Economic Shifts

R-star, the unobservable economic rate that indicates equilibrium, reflects changing factors over time. In the post-global financial crisis (GFC) decade, a focus on banking stability, restrictive fiscal policies, and subdued corporate sentiment kept R-star low. However, after COVID, expansive fiscal policies and loose financial conditions revitalized the economy. Current inflation discussions have shifted from fears of recurring spikes to focusing on the labor market, with inflation trends slightly elevated but manageable for the Federal Reserve. While recent economic data suggests potential overheating risks in 2025 or 2026, these concerns are not immediate.