The Federal Reserve is confronting a question it hasn’t seriously studied in three years: is the U.S. economy overheating? Oil prices hover around $110 a barrel, the 10-year Treasury yield has pushed above 5%, and national debt crossed $40 trillion less than a month ago. Inflation remains above 3% while nominal GDP grew more than 6% in the second quarter, suggesting aggregate demand is running too fast. Markets are pricing in a quarter-point hike Wednesday with near certainty, though it remains unclear whether this will be a one-time course correction or the beginning of a new tightening cycle.
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