The economy has proven resilient, defying all the reasons it shouldn’t be, to which diehard hard landers still cling. We expect that it will remain resilient and that inflation will continue to fall to the Fed’s target (a.k.a. “immaculate disinflation”). In this scenario, the Fed won’t be rushing to ease and won’t ease by much. The Fed’s policy stance is perhaps better cast as “normalizing” than tightening that requires undoing.
Labor market supply and demand are coming into better balance, as the Fed would like, though November employment data attest to the labor market’s continued strength.
Also: What to make of the fact that GDI is weaker than GDP.