US inflation is picking up and reaching close to the Federal Reserve’s 2% target. However, a simple look at the total amount of output (GDP) from the US economy reveals that – despite mechanically strong growth rates – we’re still a long way from pre-pandemic levels of output.
That makes any action by the Federal Reserve to raise interest rates very unlikely for now. Until output returns to the pre-pandemic trajectory, the economy will still be considered to be in ‘recovery’ and the Fed is unlikely to want to disrupt that.
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