Disinflation Expected to Continue as Growth Slows, Fed Sees Rate Cuts in 2024
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December CPI consensus expects core inflation to decrease from 4% to 3.8% annually, monthly core steady at 0.3%. Headline CPI to rise from 3.2% to 3.1%.
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Disinflation likely to continue until June due to base effects and predictable deceleration in shelter inflation.
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Fed sees supply improvements as healing inflation, further disinflation may need to come from softening product and labor demand.
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Monthly core CPI needs to fall to 0.1-0.2% for 2% target. 0.2-0.3% will bring inflation from 4% to 3% by June.
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Fed likely to cut rates in 2024 H1, economy may slow in 2024 H2. Risks are oil price spikes and other supply chain disruption.