Ella 
Rising inflation, strong economic activity and employment data have pushed market expectations for the first rate cut to December. We still believe there is an opportunity for a rate cut in September. Still, the Fed will remain vigilant and signal that if inflation remains high, so will interest rates.
Strong data forces Fed to sound less dovish
At the March FOMC meeting, the Fed insisted that the most likely future path was three quarter-point rate cuts in 2024 and three more cuts in 2025. While they won’t update those forecasts again until June, the fact that inflation continues to be overheated and the economy is still growing strongly suggests they are more cautious about the prospect of easing policy at next Wednesday’s FOMC press conference.
Core CPI has remained at 0.4% month-on-month for three consecutive months, which is more than twice what we need to get inflation down to 2%. At the same time, consumers continued to spend aggressively, adding 829,000 jobs in the first quarter of this year. This led Fed Chairman Jerome Powell to say on April 16 that “recent data clearly do not give us greater confidence” that inflation is being brought under control, “rather, suggest that achieving that confidence may take longer than expected.” time.” He also warned, “If inflation continues to rise, we can maintain the current purchase restrictions if necessary.”
