More from Daly: Can’t count on productivity to save the US from inflation

• Fed policy is restrictive but it may still take time to bring inflation down

The comments from Daly (and others) lately might as well say ‘we have no idea what’s going on, we’re data watching like the rest of you’. There is a huge amount of money to be made by who figures out first if we’re in a low-inflation or sticky-inflation regime.

More:

• If labor market were to falter in a ‘fundamental way’ policy action would be needed
• Do see the labor market cooling but that is what should be happening
• A softening labor market would be getting back to normal
• Still seeing disinflation underway, no doubt things are slower than last year
• Still seeing supply improvement, no evidence that the Fed has to really push the economy down

So there’s going to be a real question about what a fundamental faltering is. Powell hinted at ‘more than a couple’ ticks higher in unemployment when it was at 3.8% (dot plot is at 4.0% for year end). Something like 4.2% would definitely get the ball rolling but even at 4.1% with some negative momentum should get them cutting or at least promising to cut soon.

This article was written by Adam Button at www.forexlive.com.