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  • A healthy economy may delay rate cuts until June

    Saturday, January 27, 2024   /   by Amy Brown

    A healthy economy may delay rate cuts until June

    NewSignNBG.pngIt has been a quiet week for economic data releases, with investor attention remaining fixed on the timetable for future rate cuts. Over the past few weeks, we've highlighted the 'tug-of-war' between markets and the Fed regarding early rate cuts. Since Fed Chairman Jerome Powell's dovish commentary in December, markets had been pricing in a March rate cut above 50%, this has changed. Market sentiment, initially favoring a March rate cut (now below 50%), now leans towards a possible cut in June.

    This change in narrative is primarily data-driven. As we discussed last week, economic reports have been consistently painting a picture of a healthy economy, allowing the Fed room to maintain a “higher for longer” policy to get inflation back down to target. On Friday, the release of the PCE Deflator came in softer than expected at 2.9%, marking the first time PCE has held a 2% handle since 2021. The phrase 'soft landing' has made its way back into analyst’s vocabulary this week, suggesting that the economy is achieving a balanced state.

    It's difficult to argue against this perspective when considering solid consumer spending and a robust labor market, coupled with easing inflation as hinted by the PCE. With a plethora of economic data set to be released next week, it will be interesting to see which direction the narrative takes from here.

    Key points to remember:

    Rates will remain steady until June where we may see a slight drop
    Housing prices continue to rise
    Competition continues to increase as we go into Spring

    Buy sooner rather than later to get the best price on the home that you want.