9 In the auto sector, where the real inventory-to-sales ratio is 20 percent below its pre-pandemic level, the retail margin for motor vehicles sold at dealerships has increased by more than 180 percent since February 2020, 10 times the rise in average hourly earnings within that sector.
As a result, in the real world, monetary policy should be—and in the United States, I believe, is—data dependent in a second sense: Policymakers should and do study incoming data and use models to extract signals that enable them to update and improve estimates of r* and u*.