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Jack Janasiewicz offers his tactical take on the latest economic data prints and how those are likely to affect the outlook for interest rates in 2024.
  • Now it’s all about when the Federal Reserve will start cutting interest rates.
  • The data continues to suggest that labor markets have normalized and are consistent with a 2% inflation environment – so a tight labor market is no longer a justification for remaining hawkish on rates.
  • Productivity has also surged, according to the most recent GDP print – and this is a big deal.
  • Productivity is running at an annualized pace of 4.1% over the last two quarters, the fastest pace we’ve seen since the late 1990s, excluding recessions and post-recession periods.
  • Pandemic and supply chain bottlenecking issues are also sorting themselves out and the catch-up period is under way in earnest.
  • Fed Chair Jay Powell no longer seems to think that below-trend growth is necessary to bring inflation back down to target. A sharply higher unemployment rate is not required either.
  • So now it’s all about when the cuts begin, and depending on how Core PCE evolves from here, that first cut could feasibly be as early as March…
Past performance is no guarantee of future results.

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