Steady as She Goes

High frequency data can be misleading. Imprecision and measurement error often cause the market to overreact. Unfortunately, discerning the Truth takes time, and time requires patience. The patient observer will note that the economy continues on a gradual, downward trajectory as it contends with restrictive interest rates. That rates are taking longer to wrestle the economy into submission seems due to the fact that leverage rates on the whole are lower, refinancings are not yet necessary, and income growth has been sufficient to support consumption growth. The best labor market in sixty years should continue to support current levels of economic activity. But shelter costs and the shakier financial security of lower-income and younger households could derail the economy. On a quiet day, if you listen closely, you can hear Chair Powell shout from the 2%-inflation-target-mast to which he’s had himself bonded, Ulysses-like, ‘Steady as she goes.’