Fed Is in 'Uncharted Territories,' Dudley Says

Federal Reserve Policy & Economic Outlook - The Federal Reserve is in no rush to adjust interest rates due to uncertainty about the economy, inflation, and the labor market [3] - The unemployment rate remains stable, similar to the previous summer [1][2][5] - The Fed aims to prevent any rise in inflation from becoming persistent, emphasizing the importance of keeping inflation expectations in check through patience [3] - The market anticipates rate cuts in the coming year, regardless of economic data, potentially influenced by a new Fed chair [13] - All Federal Open Market Committee members expect interest rates to be lower by the end of next year [17] Labor Market Dynamics - Labor demand growth is slowing, but the labor market hasn't loosened because the unemployment rate is unchanged [5] - Both labor supply and labor demand have slowed, with immigration policy being a contributing factor to the slowdown in labor supply [2][5] - Payroll employment growth has decelerated, which could become problematic if the trend continues [4] Tariff Impact & Trade Policy - The impact of tariffs on the economy is uncertain, particularly regarding inflation and business fixed investment [3][10] - A hypothetical 18%-20% tariff rate is compared to the economic tensions of the 1930s [6] - The current tariff shock may be more significant than in the 1930s due to a higher share of imports in GDP [8] - Most economists believe that tariffs will eventually be passed through to consumers, with every 1% increase in tariffs as a percent of imports adding about 01% to the price level [11][12] - An increase from 25% to 17%-18% in tariffs on imports could raise the level of prices by about 05% [12]