by Calculated Threat on 6/19/2024 01:51:00 PM
Final week’s benign US inflation knowledge bolstered our view that the Q1 spike was an aberration. In the meantime, the labor market stands at a possible inflection level the place an additional softening in labor demand would hit precise jobs, not simply open positions, and might subsequently push up the unemployment price extra considerably. We thus proceed to anticipate two Fed price cuts this 12 months (in September and December) …
emphasis added
The “Art of the Soft Landing” requires that the Fed cut back charges fast sufficient to maintain financial progress optimistic, and gradual sufficient to not reignite inflation. My view is a tender touchdown is achieved if progress stays optimistic, inflation returns to focus on, and the yield curve flattens or reverts to regular (lengthy yields increased than brief yields).
The excellent news is progress has stayed optimistic and inflation has moved nearer to the two% goal. Nevertheless, the yield curve remains to be inverted, and we’re not out of the woods but.
If Hatzius is right that the reported pickup in Q1 inflation was an “aberration”, it looks as if the FOMC will lower charges quickly (in all probability September).
Most market contributors anticipate 2 price cuts this 12 months, with the primary lower in September.Â
