Inflation's still above 3% (headline and core)... and SuperCore is still above 5%... and unemployment rates remain near the lowest deciles in US history...
Does that really sound like a time for The Fed to cut rates? According to the talking heads on CNBC and the market - the answer is yes.
But according to The Fed's statement, no!
⚠️ Whether or not dots were revised post-CPI... the takeaways are: (1) FOMC agree '24 will see 1 or 2 cuts; (2) wide range of views on how policy plays out after this; (3) but overall dots have shifted up; (4) two schools of thought on R* (some higher vs. others no change) $USD pic.twitter.com/1yPNtOCk9q
— Viraj Patel (@VPatelFX) June 12, 2024
The problem that Fed Chair Powell has is that September is his next option - which is precariously close to the election (the November FOMC is two days after the election). The market was pricing a 78% chance of a first cut in September before the dots were released...
So given today's exuberance around a dip in inflation, will Powell drop a hint or reassure that they are data-dependent... and completely apolitical...
Given the hawkish nature of the dotplot, we would expect Powell to jawbone us back to a post-CPI dovish shift... "Remember, the dots are not a forecast" or some such bullshit...
Watch Powell's press conference live here (due to start at 1430ET):
Inflation's still above 3% (headline and core)... and SuperCore is still above 5%... and unemployment rates remain near the lowest deciles in US history...
Does that really sound like a time for The Fed to cut rates? According to the talking heads on CNBC and the market - the answer is yes.
But according to The Fed's statement, no!
⚠️ Whether or not dots were revised post-CPI... the takeaways are: (1) FOMC agree '24 will see 1 or 2 cuts; (2) wide range of views on how policy plays out after this; (3) but overall dots have shifted up; (4) two schools of thought on R* (some higher vs. others no change) $USD pic.twitter.com/1yPNtOCk9q
— Viraj Patel (@VPatelFX) June 12, 2024
The problem that Fed Chair Powell has is that September is his next option - which is precariously close to the election (the November FOMC is two days after the election). The market was pricing a 78% chance of a first cut in September before the dots were released...
So given today's exuberance around a dip in inflation, will Powell drop a hint or reassure that they are data-dependent... and completely apolitical...
Given the hawkish nature of the dotplot, we would expect Powell to jawbone us back to a post-CPI dovish shift... "Remember, the dots are not a forecast" or some such bullshit...
Watch Powell's press conference live here (due to start at 1430ET):