Fed's passive policy risks future volatility despite current market pricing

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The US economy is experiencing strong nominal GDP growth, with Q2 private final sales exceeding 9% and Q3 estimates projecting real final sales above 4%, potentially leading to 7-9% nominal growth. This heating economy, combined with the Federal Reserve's current passive monetary policy, could lead to future volatility and threaten the business cycle if the Fed is forced to aggressively catch up later. However, credit markets and forward-looking inflation expectations are not currently pricing i