Goldman's Vassalou Sees Fed Rate Holding at 5%

The video discusses the economic outlook for 2023, focusing on the Federal Reserve's potential actions regarding interest rates. It highlights concerns about high inflation and the market's possibly optimistic expectations for the terminal rate. The discussion emphasizes the importance of the terminal rate over the pace of rate increases and the need for rate stability to avoid financial crises. The Fed's effectiveness in monetary policy is questioned if rates are raised and then quickly cut.

What are the economic conditions that the Fed is looking ahead to in 2023?

How does the current inflation rate compare to the Fed's comfort level?

What does the market's pricing of the terminal rate suggest about future economic expectations?

What implications does the Fed's potential rate increase have on monetary policy effectiveness?

What is the expected duration for which the Fed may maintain a restrictive rate level?