On the November FOMC
he FOMC upgraded its growth outlook despite the hurricanes, and subtly noted that the onset of balance sheet normalization has been a non-event. Despite that good news, headline and core inflation remain below target, and indeed have fallen – with core PCE back to six-year lows. This is Yellen’s “conundrum.” For her successor, the challenge will be to set policy when growth seems to call for higher rates, and inflation seems to call for lower. We’re not convinced that Powell will be up to it.