sWhat are some of the analysts saying after the FOMC rate decision:
- Wells Fargo: “On balance, we remain confident that the FOMC will begin reducing the federal funds rate before the year is out. It will be a close call between one and two 25 basis point cuts.
- Morgan Stanley: “We continue to see three cuts this year, starting in September, informed by our core PCE forecasts that reach a 3-month annualized pace of 2.5% ahead of the meeting. Inflation continues to move convincingly lower, and the Fed cuts every meeting through mid-2025”
- Goldman Sachs: “We continue to expect a 1st rate cut in September and a 2nd cut in December…With two better rounds of inflation and data now in hand, we think that if the next three rounds are in a similar range, the leadership is likely to push through a cut in September”
- Bank of America: “Overall , we retain our view for one rate cut this year in December and for gradual easing cycle that ends with the terminal rate of 3.5% – 3.75%”
Former Fed member James Bullard favors a more “Greenspanian” approach that moves away from the idea that the initial move is “very momentous….What I’d advocate for is a technical adjustment that takes on board the idea that inflation is lower today than it was last summer.”
The WSJ TImiraos said Federal Reserve Chair Jerome Powell’s strategy is summarized as “Trust, but verify,” focusing on ensuring inflation trends down before cutting rates.
Doublines Gundluch said the Fed will be readjust their rate projections as the unemployment rate moves toward 4.4% by the end of the year. The Fed projects 4.0% for the year end employment.
Former Fed member Alan Blinder is projecting two cuts in 2024, with the possibility of the first cut at the end of July (but he puts that at 20%).
Core PCE projections given the CPI and the PPI are now being forecast:
- Citi +0.15%
- Panthieon +0.11%
- Capital +0.11%
- Goldman 0.13%
That compares to the year-to-date average of 0.33%.
There is now a 72% chance of 2 hikes priced by the market.
Remember at the March meeting after they kept 3 cuts in the dot plot, the thought was “no-way” shortly after that meeting. Now the market is leaning toward “no-way” for 1 cut.