Lee: Real rates are too high, and they're restraining the economy

Fed Rate Policy & Inflation - The Fed is likely to lower rates, considering the downward trend of inflation approaching the 2% target [1] - High real rates are restraining the economy, suggesting a need for rate cuts [2] - The impact of tariffs on inflation is considered minimal and temporary, unlikely to significantly alter the Fed's course [3][4] - A potential one-time price jump from tariffs is expected, with the US being a relatively closed economy where services constitute 70% of the consumer basket [4] - Even a 20% tariff increase is projected to raise prices by less than 1 percentage point [4] - Dollar decline since February is adding to inflation pressure, potentially more so than tariffs [10] Labor Market & Economic Impact - The Fed is cautious about weakness in the labor market translating to unemployment [6] - Maintaining the unemployment rate in the 4-45% range is a key objective for both the President and the Fed [7] - Weakness in the labor market will drive the Fed's rate decision more than inflation [8] - Long-term interest rates significantly affect the economy, influencing housing and investment decisions [8] - The US government's deficit and spending policies are crowding out the economy, potentially hurting it more than other factors [9]