Via a note from Bank of America following the CPI report that got everyone expecting quicker rate cuts, again..
This in brief:
- While the report was certainly a positive one relative to ugly reports to start the year, it is only one month and we think not a big enough step for the Fed to get overly excited.
- Based on our read-through to PCE inflation, we expect core PCE to print at 023% m/m or 2.8% annualized.
- Therefore, inflation in April is an improvement from 1Q but is still above the Fed's 2% target.
- As a result, we retain our call for the first cut to be in December
Not earlier says BoA:
- Market pricing on the other hand thinks a cut in September and two cuts this year is very likely. Following the report. markets now price almost 2 full 25bps cuts by the end of the year and more than 85% probability of a cut by the September meeting. We think inflation data will have to slow much more or the labor market data needs to weaken to really bring a September cut into play.
Jerome Powell
Not gonna cut rates on a marginally improving CPI report. And, let's face it folks, the improvement was only marginal.