Guy Berger, Ph.D.’s Post

Once we hit 2-3% inflation and saw even a hint of weakness in the labor market, the Fed responded with a hasty 50bp rate cut (and signals of more), as the cost of pushing inflation lower became too high. Inflation dynamics have accordingly likely bottomed, and 2025 is set to be re-inflationary in several ways.

Inflation data in the US today showed that the disinflationary trend remains intact, although progress is very slow. The core PCE (the Fed’s favorite measure) is still close to 2.8%, the highest level since July 1993 (excluding the pandemic, see chart below from Bloomberg). Durable-goods prices are declining, and on the services side, the stickier health-care and housing prices are moderating. With income growth slowing and real spending actually declining, these are all good signs for the Fed. However, given the resilience of the US economy and the still elevated inflation level, the Fed is unlikely to change its stance in the coming months. We’ll definitely need more data to make a well-informed judgment either way.

Is the Fed's rate cut too late to prevent a recession? This week's macroeconomic data says no. Q2 GDP growth was in line with expectations at 3%, and the Fed's preferred inflation gauge eased to 2.2%. See additional data from this week below.

🚨🇺🇸 The FED Since 2021: 1. Jan 2021: Inflation is "transitory" 2. Dec 2021: Inflation is not transitory 3. May 2022: Recession is needed to lower inflation 4. Feb 2023: We may be able to achieve a "soft landing" 5. Sept 2023: Inflation will hit 2% in 2025 6. July 2024: Rate cuts are not needed yet 7. Sept 2024: We need a 50 bps rate cut to avoid a recession 8. Last Wednesday: Economy is strong and we are not "in a hurry" to cut rates 👉 Is this the most incorrect Fed q of all time?

🚨🇺🇸 The FED Since 2021: 1. Jan 2021: Inflation is "transitory" 2. Dec 2021: Inflation is not transitory 3. May 2022: Recession is needed to lower inflation 4. Feb 2023: We may be able to achieve a "soft landing" 5. Sept 2023: Inflation will hit 2% in 2025 6. July 2024: Rate cuts are not needed yet 7. Sept 2024: We need a 50 bps rate cut to avoid a recession 8. Last Wednesday: Economy is strong and we are not "in a hurry" to cut rates 👉 Is this the most incorrect Fed q of all time?

Following the anticipated 0.25% rate cut, the Fed’s latest decision shows a cautious stance as inflation indicators remain above target. With core inflation sticking stubbornly above 2% and rising labor costs, the Fed may slow down its rate-cutting pace to avoid reigniting inflation, signaling that sustained reductions may not be in the cards as we head into 2025. Read Senior Economist Dan North's full report on what this means for the economy here: https://ow.ly/9vcO50UcH4u

Following the anticipated 0.25% rate cut, the Fed’s latest decision shows a cautious stance as inflation indicators remain above target. With core inflation sticking stubbornly above 2% and rising labor costs, the Fed may slow down its rate-cutting pace to avoid reigniting inflation, signaling that sustained reductions may not be in the cards as we head into 2025. Read Senior Economist Dan North's full report on what this means for the economy here: https://ow.ly/tbes50UfG5e

U.S. inflation eased in May. Fed holds rates steady, signals fewer cuts in 2024. Read more in our latest edition of the Weekly Economic Headlines.

Following the anticipated 0.25% rate cut, the Fed’s latest decision shows a cautious stance as inflation indicators remain above target. With core inflation sticking stubbornly above 2% and rising labor costs, the Fed may slow down its rate-cutting pace to avoid reigniting inflation, signaling that sustained reductions may not be in the cards as we head into 2025. Read Senior Economist Dan North's full report on what this means for the economy here: https://ow.ly/sfkK50Uehfa

Following the anticipated 0.25% rate cut, the Fed’s latest decision shows a cautious stance as inflation indicators remain above target. With core inflation sticking stubbornly above 2% and rising labor costs, the Fed may slow down its rate-cutting pace to avoid reigniting inflation, signaling that sustained reductions may not be in the cards as we head into 2025. Read Senior Economist Dan North's full report on what this means for the economy here: https://ow.ly/80Hp50UcYKC