With inflation outlook improving, pivot is still on

In a hawkish Jackson Hole speech, Fed Chair Jerome Powell argued that “restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.” Nevertheless, we still anticipate that a faster drop back in inflation (including core) over the next 12 months will persuade the Fed to begin lowering interest rates again before the end of next year. The pivot is still on.

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