Inflation cools as central banks shift focus to rate cuts

<p>From a JP Morgan Private Bank note from Wednesday, a couple of snippets, in summary, on inflation and the Federal Reserve.&nbsp;</p><p><em>One of the biggest surprises this year has been how much inflation has cooled alongside that economic resilience. While inflation isn’t back to the Fed’s 2% sweet spot, 40% of the Consumer Price Index’s components are now at or below that coveted level. </em></p><ul><li><em>The last mile of progress may still take some time, but the stickiest drivers of inflation—namely the still-hot clip of wage growth and rent prices—have ample room to continue cooling. </em></li><li><em>This gives us the confidence that central banks are probably finished hiking and seem to be in their “higher for longer” era.
</em></li></ul><p><em>Since the three major developed market central banks (the Fed, ECB, BoE) started hiking to tame inflation, they’ve increased policy rates a cumulative 1,490 basis points. With all three now seemingly on hold, the prevailing debate is shifting to when the first rate cuts might come. Markets are currently pricing in a 70% chance of a Fed cut by its May meeting.
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To be sure, the impacts of the rate hikes we’ve already seen will continue to work their way through the economy (which is what the Fed wants to see)</em></li></ul><p>—</p><p>On wage growth and wage growth and rent prices having "ample room to continue to cool" seems an overly optimistic way of saying these are still way too high.</p><p>—</p><p>In separate news analysts at JPM have raised their forecast for UK 2024 GDP to 0.4% from previously at 0.2%</p><p>Cable update:</p><p><br></p><p><br></p><p><br></p><figure data-media-><img src="https://images.forexlive.com/images/gbpusd%20chart%20update%20gdp%20forecast%2023%20November%202023_id_b5f84101-2398-4e07-a558-30e6ad7a1e9d_size900.jpg" alt="gbpusd chart update gdp forecast 23 November 2023" width="1034" height="687" wrapper-="wrapper-" data-src="https://images.forexlive.com/images/gbpusd%20chart%20update%20gdp%20forecast%2023%20November%202023_id_b5f84101-2398-4e07-a558-30e6ad7a1e9d_size900.jpg" /></figure><p><br></p><p><br></p>

This article was written by Eamonn Sheridan at www.forexlive.com.