I believe that monetary policy should
look through the tariff effects on
inflation. I've been saying this for a
year.
With underlying inflation close to 2%,
market-based measures of longerterm
inflation expectations firmly anchored
and the chances of an undesirable
weakening in the labor market have
increased. Proper risk management means
the FOMU FOMC should be cutting the
policy rate right now. I felt this way
in July and all the evidence since then
has led me to feel more strongly about
it today.
Based on what I know today, I would
support a 25 basis point cut at the
committee's meeting on September 16th
and 17th. While there are signs of a
weakening labor market, I worry that
conditions could deteriorate further and
quite rapidly. And I think it is
important that the FOMC not wait until
such a deterioration is underway and
risk falling behind the curve in setting
appropriate monetary policy.