While we were away doing our grandparental duty, it appears the Federal Reserve finally woke up and did theirs – easing as the market expected, but finally suggesting that they may take away the punchbowl if inflation does not begin to behave better. The headline and core PCE deflators did come in low, at 0.1% each – and tough comparisons in last year’s first quarter (up 1.1% for each) should bring inflation down. Still, with real GDP running at near 3% for the third quarter in a row, and inflation still well above 2%, nominal growth remains at least a half point higher than current overnight rates. Earnings expectations for the S&P500 next year are 10% -- hardly a recession forecast. Now that the Fed has carved a full point off rates, it may be time to look at the policy landscape early in 2025 before acting again.
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