Fed to cut twice or not at all, Evercore ISI says
Investing -- The Federal Reserve is likely to cut rates twice this year starting in September, but if inflation data doesn't show enough of a slowdown by September, then the Fed is unlikely to deliver any cuts at all this year as there will be little chance of the data improving enough by year end.
The two-rate cut camp believe in Fed chairman Jerome Powell's dovish thesis that monetary policy is restrictive, the recent upside surprises in inflation were backward looking, representing a blip along a bumpy road toward the 2% inflation target, and inflation will downshift at some point in the coming months, paving the way for September rate cut, Evercore ISI said.
If the inflation data doesn't show enough progress, or specially year-on-year core PCE inflation treads water around 3%, absent of cracks in the labor market, then the Fed isn't likely cut at all until March next year, as the central bank's higher for longer policy would have had time to make a bigger impact on the economy and the base effects "start to work in the Fed’s favor again, with the hot January and February 2024 inflation prints dropping out of the year-on-year...
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