We are skeptical of the signal from the yield curve now given the likely distortion from non-U.S. as well as U.S. QE and negative bond yields in much of the world.
The case for rate cuts is much weaker now than in previous mid-cycle Fed easings.
The latest data, and still-accommodative financial conditions, suggest the Fed does not have to cut rates aggressively.
We can see the meaningful risk of a recession starting as soon as 2020.
Maybe the U.S. economy can sustain an unemployment rate as low as 3.5% without a persistent upward bias to inflation, but we are highly skeptical.
The possible need for policy to get restrictive, not just neutral, is likely to become a regular talking point for Fed officials in the months ahead.
U.S. GDP growth may seem weak relative to previous expansions, but it is unsustainably strong relative to potential.
Could a rise in the U.S. labor market participation rate help stop the uptrend in inflation? Not likely.
There is no way to know the precise level, and it can change over time.
We have been—and still are—quite positive on the U.S. economy, but could trade warmongering derail the outlook?