We’re going to have low readings of y/y inflation drop out in H2Because of that, we get a slight rise in core inflation because of thatIf we get more readings like today, it would helpWe don’t have a high confidence in forecastsRegardless of the dots, everyone at the FOMC would say they’re ‘very data dependent’
The bolded is all that really matters here. It’s safe to go back to watching data.
We are seeing gradual cooling in the labor market as it moves into better balanceThere’s an argument that labor gains are overstated but they’re still strongOur sense is that the rate cuts that were going to take place this year will take place next yearWe will have to see where the data light the wayToday was a better inflation report than almost anyone expectedWe’ve made pretty good progress on inflationWages are still running about a sustainable pathWages are not the principle cause of inflation but needs them to come down for overall inflation to get back to 2%It may take ‘several years’ for bulge from higher market rents to filter throughCredit card balances and defaults have been going up but they’re not at high levelsConsumer spending is still growing solidlyOur plan is not to wait for things to break and then try to fix them
The US dollar continues to grind higher on Powell’s comments. That argues that the market thought Powell would surprise on the dovish side as well, or squarely put a Sept rate cut on the table, particularly after CPI.
This article was written by Adam Button at www.forexlive.com.
