With the inflation gap about to start closing rapidly (let’s not argue too strenuously as to when we will re-enter the target as nobody really knows, but it may be sooner rather than later), and external risks diminishing daily (though keep a sense of proportion) even as the output gap is steadily deteriorating, it doesn’t require rocket science to see where this may be leading. Soon, too, by all appearances.
Expect a series of interest rate cuts, starting soon. Along with a more accommodative fiscal stance, this may assist in keeping the looming recession next year mild, meaning shallow and short, despite an increasingly intimidating global recessionary backdrop.
Politically, that would be extremely good timing, too.
