Powell Will Vote With His Mind and Heart, Daco Says

• The economy is described as 'strong on the surface but fragile' with 'layered supply shocks' contributing to inflation persistence.
• Daco believes current monetary policy is 'easier than it appears' and the Fed should consider tightening or at least signaling a potential tightening.
• There is a potential for Fed Chair Warsh to dissent, advocating for easier monetary policy based on expected AI investment and productivity growth.
• Most policymakers are focused on current inflation being above the 2% target and moving in the wrong direction, suggesting a more hawkish stance.

Gregory Daco, EY-Parthenon Chief Economist, discusses the US economy's 'fragile' growth despite surface strength, attributing persistent inflation to 'layered supply shocks'. He argues current monetary policy is 'easier than it appears' and the Fed should consider tightening. Daco also highlights potential dissent within the FOMC, with Chair Warsh favoring accommodative policy due to expected AI-driven productivity, contrasting with the majority's focus on current high inflation.