US data should give officials more confidence that inflation is heading to 2% and we suspect attention will start focusing on achieving a ‘soft landing’ for the economy.
Next week’s FOMC meetingshould lay the groundwork for a September rate cut as policy starts shifting from restrictive territory to something more neutral. Back on track for rate cuts We have to ask the question: have events already overtaken the Fed ? At June's FOMC meeting, the most interesting aspect was the Fed moving away from a view of three possible rate cuts this year suggesting just one was the most likely path ahead.
This, we believe, will pave the way for three rate cuts this year in September, November and December, with at least three more next year. The 2-year and 10-yearr are heading to 4% in anticipation of first cut by September The spread from the 2-year yield to the effective funds rate has hit a new low at -93bp as we build to a first rate cut in the cycle ahead.
Macroeconomics Inflation CPI Growth
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