From Nasdaq:

1. The Fed says March is not their base case for a rate cut, disappointing markets. They want to see more progress on inflation, although headline PCE inflation is down to 2.6% YoY and core PCE is down to 2.9% YoY.

2. Markets now expect the first rate cut in May, 10 months after the last hike. Inflation has been falling, pushing up real rates and making monetary policy more restrictive.

3. The real fed funds rate is the nominal rate minus inflation, currently at 5.5% and falling core PCE inflation from 4.2% YoY to 2.9%, increasing real rates to 2.5%.

4. The Fed typically cuts rates when the real fed funds rate is between 2%-3%, but it’s currently at 1%, at or above a level consistent with past cuts.

5. The Fed has been cutting at progressively lower rates since the ’70s due to demographics, with a real interest rate around 1% being enough to slow the economy. Even if the Fed cuts as much as expected, real rates will still be relatively restrictive.



Read more: Fed Pause Has Tightened Monetary Policy