September 20, 2024 at 04:32PM
The economy is strong and inflation is coming down
I was open to the idea that we could front-load and the inflation data during blackout pushed me in that direction
CPI and PPI will feed into core PCE; which will be somewhere around 0.14%
Over the last four months, core PCE running at 1.8% with very high housing-services inflation
If you strip out housing services, core PCE would be running under 1% over the past four months
I can think of several scenarios that will determine the pace of cuts. If it’s fine you can imaging going 25 bps
If data comes in softer, you can see going at a faster pace
We could even pause depending on the data
What’s got me more worried is that inflation is running softer than I thought
If the data comes in soft, I would be much more willing to be aggressive on rate cuts
We’re doing exactly what we thought at the start of the year, it just took longer because of Q1 high inflation
Inflation has reversed on us before, it could reverse again
Inflation is on the right path as long as we don’t let it get too low
Don’t hear a lot of firms saying they have pricing power
Quotable:
“The committee sees a lot of room to move down over the next 6-12 months. That’s really what we should be focusing on.”
This is some dovish stuff from a guy who often delivers a more-hawkish message.
This article was written by Adam Button at www.forexlive.com.