Activity data have kept skewing towards surprising resilience. Price and wage inflation drive current policy decisions, but activity is critical to the outlook.
The resilience of GDP growing near its potential pace means the current effective policy setting doesn’t look that tight. Neutral rates may be near pre-GFC norms.
Policymakers can wait for evidence that cyclical excesses have gone before turning to relatively small and late cuts. Policy hysteresis only compounds this pressure.
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