Upside inflation surprises prompted the U.S. Federal Reserve to hike its policy rate by 75 basis points (bps) for a historic fourth time. This brought the fed funds rate up to a 3.75%–4% range, meaningfully above the Fed’s 2.5% median long-run estimate, as elevated inflation continues to justify contractionary monetary policy. Despite continued upside inflation surprises, the Fed also altered the forward guidance in its November statement to emphasize the amount of tightening to date and the lags with which monetary policy impacts the economy. While the statement language left the door open to a further continuation ... (full story)