Atlanta Fed Pres. Bostic is on wires say:
- Rate cuts are not seen as imminent, but preparations for possible principles and thresholds to guide the process are underway.
- Anticipation of two quarter-percentage-point interest rate cuts in 2024, with the first possibly in the third quarter, contingent on continued progress on inflation.
- 2024 GDP growth is projected at just over 1%, with unemployment at 4% by the end of next year, and PCE inflation at 2.4%.
- There is a general consensus among Fed officials that the policy rate is at a peak, conditional on continued progress in inflation.
- The US economy is still far from the Fed’s 2% inflation target, though progress is being made faster than expected.
- Determining the appropriate ‘neighborhood’ for inflation that would warrant rate reductions is crucial, as data is getting closer to this point.
- Inflation over 3- and 6-month horizons will serve as significant markers in upcoming discussions.
- Despite recent positive signs, the strength of the economy may still hinder progress on inflation, emphasizing the need for cautious policy reactions.
- The Fed has been frequently surprised throughout the coronavirus pandemic, underscoring the importance of flexibility in policymaking.
- It is expected to take several months for the Fed to gather enough confidence in the continuing decline of inflation to consider reducing rates.
- The risk of a new inflation spike has significantly decreased.
- Business contacts do not foresee large job losses in the near future, but the Fed remains attentive to any changes.
- The risks in the economy are now seen as fairly balanced.
There was a lot of chatter given to the idea that the 6 month core CPI hit 2.9% (annualized) after the last report. It is not 2.0% but has a 2% handle. It will still need more work. If core-CPI comes in at 0.2%, that is 2.4% not compounded. The last time CPI core rose 0.1% on a MoM basis was back September 2021.
This article was written by Greg Michalowski at www.forexlive.com.