Fed Policy
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.
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.
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.
Just a bit of Fedspeak after this week's FOMC meeting, none of it particularly revealing.
The data is consistent with those hoping for a soft landing—and soft landing cuts.
Every member that's spoken since the March meeting has expressed both a further desire to be patient on starting rate cuts (in response to the inflation data) and confidence that holding rates steady for longer will, on the margin, come with less downside risk to the labor market.
Most of the Personal Consumption Expenditures (PCE) inflation gauges are sourced from Consumer Price Index (CPI) data, but Producer Price Index (PPI) input data is of increasing relevance, import price index (IPI) data can prove occasionally relevant. There are also some high-leverage components that only come out on the day
