Loading ...Although the Federal Reserve has been steadily raising the cost of borrowing, the real level of Fed Funds is rising nowhere near as quickly as the angst amongst investors.
Accounting for inflation, Fed Funds are still firmly negative! So yeah, maybe nominal short rates are much more positive than a year ago, yet on a real basis, the Federal Reserve is barely keeping up with inflation.
I know, I know – we are late-cycle and the economy is about to roll over… I know all the bearish arguments. Well, based on current fiscal and monetary policy, I just don’t see the ominous storm clouds on the horizon.
The Taylor Rule is by far from perfect and many economic academics have tried tweaking it to make it better, but no matter which iteration you are partial to, the Federal Reserve is still extraordinarily easy.