**As seen in Risk In The Week report 04/29/24, subscribe at cablefxm.co.uk/reports
The last FOMC monetary policy decision came with a fresh batch of staff projections while Fed's Powell repeated that starting policy easing this year would be appropriate. As a reminder, the Fed maintained its 2024 funds rate forecast unchanged but revised both inflation and output higher, the board now expects core PCE inflation to rise 2.6% Y/y vs their prior call of 2.4%. Also, next year's median dot plot projection was lifted to 3.9% from 3.6% in December. The decision preceded the March inflation figures which marked the third consecutive month of upside surprises, this amounted to pressure on the Fed to keep rates steady at 5.50% while some desks have brought rate hike scenarios up.
This week will hold key data in the form of the quarterly ECI and the labor market report.Strategists at Rabobank warned that not only CPI and core PCE printed above expected but core services ex-housing inflation is moving higher and this will keep the Fed from starting its rate cut cycle in June. Rabobank however, sees U.S. unemployment moving up in H2, they pencil two rate cuts in 2024. Rabobank is also looking at developments in the political front, they flagged upside inflation risks in a Trump victory scenario. This week, we will be looking for an extension of hawkishness from the Fed now that March CPI and PCE figures are out of the way.
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