Cooling Inflation Could Lead Fed to Begin Rate Cuts by Mid-2023

• Core PCE inflation increased 2.8% in January, the lowest annual increase since March 2021. This is the Fed's preferred inflation gauge.

• Economist Tuan Nguyen believes cooling housing inflation will help lower overall and core PCE inflation to around 2% and 2.5% respectively by mid-year.

• Nguyen expects the first Fed rate cut to happen around June 2023 based on the inflation outlook.

• The probability of a June 2023 rate cut is currently around 70% according to markets. Nguyen believes the Fed will not rush into early rate cuts.

• By summer, the Fed will have a year's worth of declining inflation data to support beginning rate cuts.