US | Fed is set to signal there’s no rush to start cutting rates

Summary

The Fed will likely convey that it continues to look for “more good data” before feeling enough confidence to begin cutting rates as the strength of economic activity has extended and shelter inflation has surprised to the upside.

Key points

• Key points:
• The labor market has remained strong in recent months, but a wider perspective suggests that it continues to gradually cool supported by the supply side.
• The most recent inflation data suggest that the pace of disinflation has likely slowed down, but an inflation resurgence that calls for further tightening is highly unlikely.
• Evidence of a still strong economy has driven financial markets to price in that the Fed will push back the start of the rate cut cycle to June, and possibly even July.
• These developments don’t necessarily call for a significant change of tone as continued evidence of a cooling labor market means the FOMC is facing more balanced risks.
• Both the policy statement and SEP projections are likely to remain broadly unchanged pointing to three fed funds rate cuts this year.

Geographies

Topics

Tags