Most likely, the deficit and debt will continue to worsen, gradually adding to the underlying level of real interest rates.
Fed officials worry that they might still have to trigger a recession to get inflation all the way down to their 2% target.
Despite all the uncertainties, recent data suggest that the economy is looking stronger.
Higher real interest rates caused by the federal deficit could drag on the economy.
There is an over-reliance on traditional indicators that just don't work as well in the economy of the early 2020s.
At the Fed's annual meeting this week, Chairman Powell will discuss today's economic landscape and the road ahead.
It looks increasingly likely that the U.S. economy will avoid entering a recession in 2023.
A recession, when it eventually arrives, should be relatively mild.
There is no need to raise the risk of recession any further to combat an inflation problem that is clearly fading.
For investors, it is important to assess all the angles on Fed policy this year.
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