From the current Taylor rule:
- Core PCE inflation was 2.7%
- CME Fedwatch predicts three rate cuts in September/October/November
- Excess labor demand

Taylor Rule:

Taylor Rule is a monetary policy rule used as a guideline for central banks to set interest rates. It determines the appropriate short-term interest rate by considering the inflation rate and output gap in the economy. The rule was proposed by Stanford University economist John Taylor in 1993. The rule recommends that the Federal Reserve should increase the federal funds rate by a certain amount when inflation is above target or the economy is growing faster than potential. Conversely, when inflation is below target or the economy is growing slower than potential, the rule recommends lowering the federal funds rate.

The formula for the Taylor Rule is usually as follows:

[ i_t = r_t^* + \pi_t + 0.5 (\pi_t - \pi_t^*) + 0.5 (y_t - \overline{y_t}) ]

in:

( i_t ) is the nominal short-term interest rate (usually the federal funds rate).
( r_t^* ) is the real equilibrium interest rate, that is, the natural interest rate in the absence of inflationary pressure or economic depression.
( \pi_t ) is the current inflation rate.
( \pi_t^* ) is the inflation target.
( y_t ) is the actual output.
( \overline{y_t} ) is the potential output.

At present, we will have a relatively favorable period of interest rate cut expectations before the actual interest rate cut!