Fed should proceed with more caution on rate cuts than was needed at September meeting
My baseline calls for reducing policy rate gradually over the next year
policy rate is currently restrictive.
If economy proceeds as expected, can move policy to a neutral stance at a deliberate pace.
If, in a less likely case, inflation falls below 2% or labor market deteriorates, the Fed can front-load rate cuts.
If inflation unexpectedly rises, the Fed could pause rate cuts.
Latest inflation data is disappointing.
Economy is on solid footing, may not be slowing as much as desired; expect GDP to grow faster in 2H 2024.
Household resources for future consumption are in good shape.
Consumers are eager to make big-ticket purchases as rates come down, with pent-up demand.
Labor market is quite healthy, labor supply and demand have come into balance.
Hurricanes, Boeing strike may reduce October payrolls growth by 100,000.
Looking ahead, expect payroll gains to moderate, unemployment rate to drift higher but stay historically low.
Watching inflation data to see how persistent recent uptick is; progress on inflation has been a rollercoaster.
Long-term inflation expectations remain well-anchored.
Inflation is expected to move closer to 2% target.
Global economic growth is showing signs of stabilization.
This article was written by Greg Michalowski at www.forexlive.com.
