Some Fed forecasts proved prescient
Core PCE inflation, the Fed’s preferred gauge, has moderated to 3.5% as of the end of October, matching the Fed’s end-of-2023 forecast from the December 2022 SEP, but is widely expected to end the year closer to 3%. While the deceleration is welcome, it would be premature for the Fed to declare victory and cut policy rates in short order. I expect core inflation to continue to move below 3% by the middle of 2024, assuming that coincides with the gradual increase in the unemployment rate I anticipate, paving the way for a pivot to easing policy rates. The Fed also came close to nailing its projection for its target fed funds rate. The central tendency — which excludes the three highest and three lowest projections — in the SEP ranged from 5.1% to 5.4% compared to the effective rate of 5.3% at this writing.
The “cleanest dirty shirt” now has too many stains
Fixed Income Portfolio Manager posits that US fiscal profligacy will change the game for asset allocators.
By
Brij Khurana