The amorphous lag explains the cat-and-mouse game between the Fed and markets that has played out since the central bank began its tightening cycle last year.
For their part, markets have long expected the Fed to quickly pivot to a pretty aggressive series of rate cuts, largely to counter the accumulated lag effects of the tightening cycle.
Taken at its most literal level, the 500 basis points of tightening since March 2022 - 17 months ago - have still not registered at all.
There is a growing body of opinion that the lags have shortened considerably since Friedman shared his 'long and variable' theory.
Reuters ImageData on Wednesday showed that consumer prices rose at an annual rate of 3.0% in June, down from 4.0% in May.
Persons:
Keen, Milton Friedman, Friedman, Christopher Waller, Phil Suttle, Jamie McGeever, Paul Simao
Organizations:
Fed, Kansas City Fed, Reuters, Thomson
Locations:
ORLANDO, Florida, U.S