The Fed could be wrong about inflation and rate hikes

Some Fed officials have signaled in the weeks since the September FOMC meeting that the economy may be so strong that they might have to raise the federal funds rate higher than they had mentioned doing. That would be unfortunate, given how well they’ve prepared the financial markets for a federal funds rate raised to 3.0% by the end of 2019.

Now they’re talking more about 3.40% in 2020. Is that really necessary? A “gradual normalization” of the federal funds rate to what they claim is a “neutral” rate (3.0% in 2019) has been clearly telegraphed and is widely anticipated.

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