Rate Realities

If 2019 real GDP growth is 2%, inflation holds at 2%, and unemployment falls no lower than 3.7% such that Y-o-Y wage growth stays around 3%, the Fed keeps rates unchanged. If growth rises above 2.3%, and unemployment falls below 3.5%, then we get one quarter-point rate hike. But, if growth dips below 1.75% and inflation weakens, we’ll see a quarter-point cut. The potential moves, while small, are critically important.