The Fed held rates steady at the meeting today and the press conference was uneventful other than Powell de-emphasizing the change in the statement that omitted a reference to progress on inflation. Powell reiterated that the Fed is in no hurry to cut rates unless there is progress on inflation or a weakening in the labor market.
We continue to forecast the Fed will cut at least 3 times this year as we forecast that core PCE is going to roll down significantly to the 2.4% range after the first quarter data is out as we are rolling off very high prints in the 1st quarter of 2024. In addition, we expect economic growth to moderate into the 1-2% range as the effects of the 100bp increase in long term interest rates causes the housing market to further slow. It is important to note that the housing sector is in a technical recession with two quarters of negative growth reflected in the last two GDP reports. Out year-end target on the 10-year treasury yield is 3.5%-4.0%.