(UBS)
At an economic forum in Florida, Bowman warned that inflation progress has stalled, and said she would “prefer to proceed cautiously in bringing the policy rate down.” She added that the Fed should be wary of cutting rates too far too fast, and allowing inflation to resurge. Cook, on other hand, in remarks in Charlottesville voiced confidence that price pressures are now largely confined to the housing sector and will continue to ease. With the disinflationary trajectory still in place and the labor market gradually cooling, she said she sees “the direction of the appropriate policy rate path to be downward.” Separately, Boston Fed President Susan Collins expressed support for more rate cuts amid diminishing inflation pressures.
Our view: The latest consumer and producer inflation data should see the Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) price index, come in higher for October than in recent months. However, with rates still in restrictive territory and the labor market continuing to soften, we still see a 25bp cut in December, followed by another 100bps of reductions in 2025. This would likely require somewhat softer inflation prints in the months ahead given the Fed’s data dependent approach. We recommend investors redeploy excess cash in a lower-rate environment, including in investment grade bonds, diversified fixed income, and equity income strategies to enhance portfolio income.
For more, see the US Daily: Year Ahead 2025: Roaring 20s: The next stage , published 21 November, 2024.
