2024-04-13 14:40:00 ET
Summary
- The US is growing strongly; it’s adding jobs in significant numbers while inflation continues to run too hot for comfort.
- We will need to see a rapid change of fortune to trigger a rate cut in the next month or two.
- We still think a slowdown is coming, and the Fed will respond, but not until the third quarter.
Ongoing strength means a June rate cut looks unlikely
The US economy continues to show remarkable resilience in the face of high borrowing costs, tight credit conditions and a weak external backdrop. It appears on course to grow at a 2.5% annualised rate in the first quarter. We already know it added 829,000 jobs in the first three months of the year. With inflation still closer to 4% than the 2% target – and Wednesday's numbers were a surprise – we have to admit that the likelihood of imminent policy easing from the Federal Reserve appears more remote than previously thought....
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U.S. Resilience Scuppers The Case For Early Rate Cuts