United States-110413299

1Michael Feroli (1-212) 834-5523michael.e.feroli@jpmorgan.comJPMorgan Chase Bank NAMichael S Hanson (1-212) 622-8603michael.s.hanson@jpmchase.comJPMorgan Chase Bank NAMurat Tasci (1-212) 622-0288murat.tasci@jpmchase.comJ.P. Morgan Securities LLCAbiel Reinhart (1-212) 270 4058abiel.reinhart@jpmchase.comJPMorgan Chase Bank NANorth America Economic Research20 September 2024J P M O R G A NData dependence continuesPowell also said that the Fed is “not in a rush,” in part to sig-nal that the Fed is making decisions meeting-by-meeting, considering the totality of the incoming data and its implica-tions for the outlook. Nonetheless, our forecast anticipates some further slowing in the labor market that compels the Fed to again cut 50bp at the November meeting. Private payroll growth at 100,000 or less, or a further move up in the unem-ployment rate, would make a strong case for another 50bp ease, in our view. We readily concede, however, that it could once again be a close call—and this time the October jobs report occurs during the blackout period. But should the labor market stabilize, with some improvement in job growth and a stable unemployment rate, then the path should be clear for the Fed to take a more gradual path toward neutral and deliv-er a 25bp cut in November, as signaled by the median dot in the latest SEP.That said, the skew of the distribution of the dots arguably is in a more dovish direction. While we obviously don’t know which dots coincide with which FOMC participant, under the simplifying assumption that the rank order of participant’s dots within each year remains the same over time, we can back out a distribution of expected policy paths. Figure 2 shows the extent of cuts implied by each participant through the end of 2025 per this exercise. While the median dots imply 200bp of cuts in total by then (including September’s 50bp move), the histogram is clearly skewed toward greater easing. 01234567125150175200225250Figure 2: Distribution of projected Fed easing through end-2025Source: Federal Reserve, J.P. MorganNumber of dots in September SEP; bp size of cuts implied by rank orderWe continue to look for the economy to avoid recession, and thus for the Fed to eventually cut to 3% by mid-2025. This would put policy in the vicinity of the neutral rate. In the SEP, the median longer-run dot again inched up slightly to now reside at just below that level. But as Powell noted in the press conference, estimates of neutral have wide uncertainty bands. Rather than looking to empirical or model-based esti-mates of neutral to guide policy, Powell once again suggested the Fed will “know it by its works.”3Q GDP stronger on resilient consumers •As we had expected, and against consensus, the Fed began easing with a front-loaded 50bp rate cut•We think a continued 50bp recalibration is warranted, but the next move will depend on labor market data•A solid consumer leads us to revise up 3Q growth to 2.5%ar, ahead of annual GDP revisions•Mixed signal