- It reflects progress on inflation, softening of labour market
- Sees year-end rate at 4.4% and end of 2025 rate at 3.4%; same as median of Fed policymakers
- Balance of risks have shifted towards risk of further labour market softening
- Too soon to declare victory on inflation but disinflation process is on track
- Policy remains tight, though uncertain on how tight that may be
- Fed rate path will depend on totality of incoming data
- Signals on economic strength has been 'confusing', with consumer spending surprisingly resilient
- Little evidence that recessionary forces are building or that inflation could surprise to the upside
As you would expect, they will be out to vindicate themselves in moving by 50 bps last week. Traders are now seeing ~51% odds of another 50 bps rate cut in November. But after having caved to market pricing last week, it will be a bit hypocritical for the Fed to suddenly try and talk that down - for now at least.
