The financial markets and most economists seem to agree that the Fed’s next move will be to cut the federal funds rate (FFR) by 25bps following the September 17-18 meeting of the FOMC. However, there is still a debate about whether restrictive monetary policy operates with a “long and variable” lag, thus requiring more rate cuts this year to avert a recession later this year or in 2025. If the Fed gets too dovish, that could be inflationary in 2025, particularly if President Donald Trump wins a second term in the White House and extends his 2017 tax-cuts beyond 2025 and increases tariffs. That's a known unknown until the November presidential election.
A known known is that the federal deficit will remain on an unsustainable path no matter who is in the White House. Another known unknown is whether and when a debt crisis might result that would force Washington to fix the problem.
