The Federal Reserve's decision to continue cutting interest rates despite positive economic indicators has left many confused. The reason for this is that the committee had already guided the market towards a rate cut in December and they do not want to reverse that guidance. Additionally, the Fed relies on models to estimate the neutral interest rate (r*) and they are currently favoring the Williams model, which suggests that monetary policy is still restrictive. However, market signals and the performance of the economy contradict this model, leading to speculation that some members of the FOMC may be reconsidering their adherence to it. Despite these factors, a rate cut in December is still expected.



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