Has the “pivot narrative” reached a crescendo? Data released yesterday increased sentiment that the Fed will lower rates by 150 bps in 2024, twice the amount as to what the Fed is suggesting via its recently revised dot plot.
Right or wrong, sentiment has played a big role in the six-week surge even as the Fed has attempted to temper expectations.
Some could argue the market is badgering the central bank to take this more aggressive path. The Committee has adamantly stated any policy decisions will be data driven, data which is not yet suggesting a change in monetary policy by the magnitude the market has perhaps discounted.
Trading is expected to wane during the day. The monthly PCE deflator—or the Federal Reserve’s preferred measure of inflation is released. Inflation is not expected to decline much from the previous month with the rate about 150 bps higher than the 2% mandated speed limit.
Last night the foreign markets were mixed. London was up 0.04%, Paris down 0.02% and Frankfurt down 0.06%. China was up 0.09%, Japan up 0.09% and Hang Seng down 1.69%.
Futures are down about 0.25% ahead of the PCE . The 10-year is off 3/32 to yield 3.85%.
I would like to wish you all a Merry Christmas and Happy Holidays.
Kent Engelke
Chief Economic Strategist Managing Director
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