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Fed Tips One 2024 Cut, Four 2025 Cuts, Higher Neutral Rate
The Fed kept rates on hold for a seventh meeting Wednesday and tipped just one rate cut for 2024, a projection that already looked dated following an unexpectedly benign read on consumer prices.
Policymakers were blessed with a very favorable inflation update just hours ahead of the decision. Underlying consumer price growth was the coolest since August of 2021 in May, BLS data showed. Better still, a CPI-derived version of the "supercore" measure the Fed's watching for evidence of services-sec
This may sound cynical, but if the Fed wanted to put themselves in a position to present the punchbowl just in time for the election then they could not be doing a better job.
Out of curiosity, I clicked through a headline on this morning’s CPI report (it was on one of the XBC sites, I can’t remember which. N? MSN? CN? I wonder how many people remember that the MS stands for Microsoft? I digress). Anyway, it pointed out that surveys show a majority of Americans think we are in a recession.
This comment inspired by your third paragraph, which illustrates just how mystifying are the Democratic Party’s inability to perform basic messaging and marketing functions.
At this point, polls are basically just a partisan exercise, and when nearly half of the country is in thrall to the Trump personality cult, I don’t know that there is messaging that would change any minds. For those that say we’re in a recession but aren’t part of the cult, it’s likely their personal economic circumstances are such that we could just as well be in a recession.
I’m willing to bet much of the poor polling numbers for Biden and the economy is a function of Trump supporters registering their protests. They can say they don’t trust polling, but they’d gladly take any opportunity they can to register their disapproval and to make Biden look bad.
I expect Biden to eke out another win in November with even better performance by Democrats in the Senate and House. The biggest issue is that Democrats are clearly on the defensive in the Senate due to which seats are up for election in this cycle. Even then, I think it’s more likely that we’ll see a Democratic trifecta than a Republican one.
Good inflation report. The fomc should have been more positive. Time for qt to go completely. If they get another flat print they may actually want to cut rates sooner than forecast.