Jack Janasiewicz offers his tactical take on the latest economic data prints and how those are likely to affect the outlook for interest rates in 2024.
- Now it’s all about when the Federal Reserve will start cutting interest rates.
- The data continues to suggest that labor markets have normalized and are consistent with a 2% inflation environment – so a tight labor market is no longer a justification for remaining hawkish on rates.
- Productivity has also surged, according to the most recent GDP print – and this is a big deal.
- Productivity is running at an annualized pace of 4.1% over the last two quarters, the fastest pace we’ve seen since the late 1990s, excluding recessions and post-recession periods.
- Pandemic and supply chain bottlenecking issues are also sorting themselves out and the catch-up period is under way in earnest.
- Fed Chair Jay Powell no longer seems to think that below-trend growth is necessary to bring inflation back down to target. A sharply higher unemployment rate is not required either.
- So now it’s all about when the cuts begin, and depending on how Core PCE evolves from here, that first cut could feasibly be as early as March…
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