Fundamentals point to slower wage growth

Fed Chair Jerome Powell argued in his post-FOMC press conference this week that, despite the stickiness of inflation in recent months, additional interest rate hikes were still “unlikely”. We still expect inflation to ease again later this year; with shorter supplier delivery times consistent with a resumption of core goods deflation, and a combination of slower wage growth and faster productivity growth consistent with lower non-housing services inflation. In that scenario, we expect the first rate cut to come in September.