Preston Mui

In this piece, we take a deeper dive into the finer details of the national accounts to gain some insight into how exactly monetary policy is restricting investment.

Inflation optimism among the doves is back, but the hawks will want to see many months of good inflation before they're sure.

If the next month delivers either another round of soft inflation data, or a weak jobs report, the FOMC should be prepared to deliver a cut in July. If they continue to delay beginning rate cuts to gain certainty, they should consider a 50 bps cut for their first cut.

Our view of where the new dots are.

With the labor market still strong and April inflation representing an improvement over Q1 but still not good enough, the committee is in “looking for confidence” mode.

The totality of the evidence points more towards a cooling (but still good!) labor market than heating up, despite the payroll prints.

Our baseline projection has the median June dot at two cuts, but it's on a knife-edge with one cut now.

We finally heard from Waller this week in two speeches, one covering the recent economic data and another about his thoughts on r-star.

The committee sounds pretty relieved after the April inflation numbers. While none of them are suddenly at the point of "great confidence" we've all been waiting for, they are nonetheless encouraged by the recent data.