US | Fed likely to stay committed to delay rate cuts despite mixed data

Summary

Intermeeting developments will likely not change the already-conveyed Fed message that more good data is needed to gain enough confidence in progress toward 2% inflation; the debate around the policy stance will continue to focus on for how long to keep the fed funds rate at its current level.

Key points

• Key points:
• Most of the intermeeting data suggest that economic activity has likely cooled down this quarter, alleviating concerns about the need for further policy tightening.
• Employment data were mixed following last week’s jobs report, but the Fed is likely to consider that the labor market continues to gradually move towards a better balance.
• Consumption resilience and the delayed pass-through of prices from newly-signed rental contracts into official figures, have continued to drive core inflation stickiness.
• Surprising changes to the SEP are unlikely, as markets have generally adhered to the continued call for patience regarding the beginning of a rate cut cycle this year.
• For now, we think that recent data supports our baseline scenario that the Fed will start a rate cut cycle in September and cut again in December.

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