Blog Persistent Inflation Pressures Could Delay Fed Action The March U.S. inflation report and other macro data will likely prompt a change in the Federal Reserve’s trajectory in 2024.
The U.S. consumer price index (CPI) rose 0.38% in March, slightly hotter than the consensus forecast and continuing an unsettling trend. Taking out more volatile food and energy prices, the net 3-month annualized core CPI inflation rate is now above 4.5%. More concerning, one of the Federal Reserve’s preferred aggregations within that measure – core services ex shelter – accelerated to 8% on a net 3-month annualized basis. Markets were quick to respond to the stronger inflation data, signaling a much lower likelihood of a Fed rate cut in June or July than previously priced. To put it mildly, the March data complicate the timing of the Fed’s policy rate cuts. The elevated and accelerating inflation data present a strong case for the central bank to delay an initial rate cut past midyear, even though midyear has seemed to be its clear preference based on recent communications. We expect the Fed will need to once again raise its core personal consumption expenditures (PCE) inflation forecast, and this time lower the total number of rate cuts it anticipates making in 2024 (down from three 25-basis-point cuts per its latest projections in March). Absent surprisingly weak inflation or labor market reports between now and June, we agree with the market signals that the Fed will likely delay. U.S. CPI: key details and outlook Goods inflation was subdued as used car prices fell more than expected in March, while core services ex shelter inflation accelerated, driven by a jump in auto insurance prices. Looking ahead, the issue for the Fed is that core goods deflation has likely troughed, while services ex shelter inflation should remain sticky absent a further easing in the labor market – something that appears less likely following the strong March employment report. Given the strength of the March CPI report, we have nudged our U.S. inflation forecast slightly higher, and now are projecting the year-over-year rate of core CPI to end 2024 at 3.5% or a bit above, versus our previous expectation for a 3%–3.5% range. Macro and monetary implications The March CPI report, strong March labor market data, and Q1 real GDP indicators (which suggest notable growth in domestic demand) all point to a U.S. economy that is still running hot, despite some help from improved supply-side production. Turning to other data of particular interest to the Fed, we believe the March core PCE inflation report will look a little cooler than CPI because it measures auto insurance differently and places less weight on shelter components. However, core PCE inflation still could be running around 3% for Q2 (seasonally adjusted and annualized), by our estimates. This is down slightly from our estimate of 3.4% inflation in Q1, but still above the Fed’s target of 2% PCE – or even the “two-point-something” that would appear tolerable to the central bank provided inflation is moving generally in the right direction. Collectively, the March CPI and employment reports bolster our view (shared in our recent Cyclical Outlook, “Diverging Markets, Diversified Portfolios”) that the Fed will likely ease monetary policy at a more gradual pace than its counterparts in other developed market economies. Indeed, there’s a non-negligible possibility that the Fed doesn’t cut in 2024 at all – and market prices suggest investors see this possibility too.
Cyclical outlook 分岐する市場、グローバル分散投資 主要国の景気の先行きにばらつきが予想される中、グローバルな投資機会を積極的に追い求めていくことが極めて重要だとPIMCOでは考えています。
Economic and Market Commentary バック・トゥ・ザ・フューチャー:タームプレミアムが復活の構え、幅広い資産価格に影響 本稿では、40年にわたり低下基調にあったタームプレミムが反転し始める可能性について述べています。
Strategy Spotlight インカム戦略アップデート:現在の魅力的な利回り、今後のキャピタルゲインの可能性 多くの投資家は現金で保有し続けていますが、今こそ債券のエクスポージャーにシフトする時だとPIMCOでは考えています。
Viewpoints 2024年のアジア太平洋市場の見通し:投資家が注目すべき四つのテーマ 予想される米連邦準備制度理事会(FRB)の利下げは、アジアのクレジット市場全般を落ち着かせるとみられますが、域内経済に与える影響はさまざまです。