Diane Swonk

But I think it's important that they see the three cuts they made as a hedge against the weakness in the labor market.

And now the risk to both inflation and unemployment are more balanced.

But they're still both to the upside.

And I think that's important as well.

And that's why the Fed is willing to sit this out and wait to see the dust settle on where tariffs end up and how inflation eventually performs.

It's something that he's very concerned about, and I am as well.

And what's most concerning now is that is also accompanied fiscal stimulus, where not only is a deficit not sustainable and on an unsustainable path, but it could add to inflationary pressures in 2026.

Thank you.

Well, I think one of the questions that hasn't been asked of the Fed is we've heard the Fed talk about curbs on immigration and its effect on the break evens on unemployment and the labor market.

More broadly, we have not heard anything about the pockets of labor shortages that are beginning to creep up.

The quit rate in leisure and hospitality absolutely soared in November and over the summer.

And that is because of curbs in immigration.

We know that foreign-born and native-born workers in some professions, most notably in the service sector, are complements, not substitutes for each other.

And that's something that we're watching closely as well.

And even with the productivity growth we've seen, the AI boom that's going on is currently with that productivity growth, not derailed inflation.

And in fact, it is adding to inflation on the margin for insalient prices for many consumers, notably electricity costs.

And then you have this cold spell on top of it that added to natural gas costs.

But all of that is still pushing up prices rather than down.

We're going to get a lot of fiscal stimulus in the beginning of the year as well.

Well, first of all, the overall unemployment rate is not really a good summary statistic right now.