Time for cut in rates is getting closer based on analysis of potential scenariosOptimistic scenario is more good inflation and data, which could mean interest rate cut in not too distant future.Second and probably more likely scenario is uneven inflation data ahead that still shows progress, that would make a rate cut in near future more uncertain.Third scenario, but with low probability, is significant resurgence in inflation in second half of the year.US central bank is getting closer to time when cut in policy rate is warranted.Current data is consistent with a soft landing, and even less of a trade-off in terms of unemployment.Recent inflation data making him more confident Fed will achieve inflation goal.On monthly personal consumption expenditures inflation (PCE), need to see a bit more evidence that this will be sustained.Moderate consumption growth may continue in second half of the year because personal income data is holding up.Labor supply and demand have finally come into rough balance.Right now he sees more upside risk to unemployment than has been seen for a long time.Wage growth has continued to slow and now consistent with rate needed to support inflation running at 2% in sustained way
Although Waller says the were likely scenario is uneven inflation data ahead, that is enough to be tilting him toward a cut, but consistent with the September cut view.
This article was written by Greg Michalowski at www.forexlive.com.
