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Solid growth won't derail inflation's downward trend

We now think the Fed will wait until June before beginning to cut interest rates but, with the downward trend in core inflation still firmly intact, we continue to see scope for rates to be cut a bit more quickly than markets expect thereafter. The lagged impact of previous monetary tightening will continue to feed through over the next couple of quarters, pushing GDP growth slightly below potential. But we expect the economy to avoid a recession, and rate cuts should eventually fuel a pick-up in GDP growth next year.