- The Fed is understandably cautious after the “transitory” mess, but its rate forecasts are too cautious.
- We expect the FOMC gradually to lower both its inflation and rate forecasts, starting in March.
- Soaring consumer sentiment, thanks to cheaper gas and rising stocks, signals continued solid spending.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Wait for the core PCE before rushing to inflation judgment
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Stock market-driven upturn in sentiment hides soft activity numbers
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Behind the headline, the trend in job growth is slowing, with more softening to come.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The labor market is weaker than the headline December jobs numbers, but it’s hardly terrible.
- Either way, the Fed’s policy decisions will be driven more by the inflation numbers than the jobs data.
- The soft December ISM services survey is not definitive, but a repeat in January would get our attention.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The November PCE report highlights the significant downside risk to the Fed’s inflation forecast.
- The Fed eventually will have little choice to ease by more than their current forecast of 75bp this year.
- Housing and manufacturing activity are near a floor, but any recovery will be slow going.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Layoffs still very depressed, but people are finding it harder to secure new jobs.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
People really like a rising stock market and falling gas prices
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The Fed’s forecasts imply remarkable stability in GDP growth and unemployment for the next three years…
- …They are likely to be wrong, and the risks to their numbers for next year are mostly to the downside.
- Homebuilders’ sentiment likely is rebounding as mortgage rates drop, with more to come.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Margins have stopped rising, but yet to start falling, auto dealers excepted.
Ian Shepherdson (Chief Economist, Chairman and Founder)US