Stephen Miran

So physical deficits are coming in also, and that also helps drive down our star.

So my view is that policy, even though financial conditions appear to be on some measures loose, policy has actually grown tighter because neutral has migrated down.

Now, I do want to be clear that financial conditions can also be driven by a variety of non-monetary factors.

There have been substantial changes to the supply side of the economy this year, both through the tax code and through the regulatory code, as well as trade renegotiation, right?

All of that can affect financial conditions for non-monetary purposes, sorry, through non-monetary channels.

And so it can be a little bit of a mistake to look at financial conditions and infer something necessarily about the stance of monetary policy, because they can be driven up by other things.

Also, they're not all loose.

I mean, you know, housing, housing finance is arguably still a relatively tight.

Oh, absolutely.

Look, my view is that services inflation is the most persistent and sticky part of inflation.

A lot of my view about services inflation is driven by the housing sector, as shelter costs are the largest cost for most families.

My view about shelter inflation, as I said, is driven by two things, as I said in the speech.

One, the fact that average rents have finally caught up to market rents, meaning the catch-up period is done.

People don't reset their leases every day.

They reset every year, every couple of years.

And so that means that a change in market rents takes time to feed through to when it's experienced by households.

When you look at the data, it seems to me that that catch-up period is done, which means that I expect shelter rents to come down, CPI rents to come down, bringing shelter inflation down.

The second thing is the immigration shock that we talked about.

My view is that immigration was pushing rents up in previous years.

And now that shock has not only gone to zero, I think it's actually reversed.