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LAST UPDATE:7/14/2018
CQM 071318 CQM 071318

There is still large gap between the real GDPs on the expenditure and income sides. Since the BEA revises comprehensive NIPA data for the past three years, the average growth rate of real GDP on both the expenditure and income sides, as a latent true economic growth rate, will be close to the Advance 2018Q2 GDP figure. We can expect a significant positive statistical discrepancy for 2018Q2. Fed economists still discuss how many rate cuts there will be this year, implying a monetary policy based on forward guidance. As long as monetary policy is really data-dependent, the monetary policy should be determined by current economic conditions, not by forward guidance. Based on CQM forecasts of real GDP and inflation, there is a good chance that interest rates will be increased 25 basis points at the August 1 FOMC meeting.

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