The Federal Reserve has recently reduced interest rates by 25 basis points, which was in line with market expectations. However, there is uncertainty surrounding future monetary policy.

Inflation has shown signs of weakening this year, but there are anticipated changes with the incoming Trump administration, which raises questions about how the Fed will approach both short-term data and long-term economic outlook.

Richard Clarida, a former Fed Vice Chair who is now an economic advisor at Pimco and a professor at Columbia University, discussed the challenges that the Fed is facing. He mentioned the impact of monetary policy lags and signals from long-end bond yields, as well as the current financial conditions and the Fed's influence on the housing market. Clarida also addressed the reasons behind the recent decline in inflation. He emphasized the evolving relationship between President Trump and the Fed, and how Trump's policies can affect economic dynamics and the central bank's decision-making process.