Deutsche Bank-Fed Watcher Officials support gradual easing path after clo...-110760921

ResearchDeutsche BankAmy Yang | (+1) 212 250 9959 | amy.yang@db.comOctober 11, 2024IMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS LOCATED IN APPENDIX 1. UNTIL 19th MARCH 2021 INCOMPLETE DISCLOSURE INFORMATION MAY HAVE BEEN DISPLAYED, PLEASE SEE APPENDIX 1 FOR FURTHER DETAILS.Fed Watcher: Officials support gradual easing path after close call in SeptemberDeutsche BankResearchAmy YangEconomist(+1) 212 250 9959 | amy.yang@db.comMatthew LuzzettiChief US Economist(+1) 212 250 6161 | matthew.luzzetti@db.comBrett RyanSenior Economist(+1) 212 250 6294 | brett.ryan@db.comJustin WeidnerEconomist(+1) 212 469 1679 | justin-s.weidner@db.com Avik ChattopadhyayResearch Associateavik-a.chattopadhyay@db.comOctober 11, 2024Distributed on: 11/10/2024 20:36:08 GMT7T2se3r0Ot6kwoPaResearchDeutsche BankAmy Yang | (+1) 212 250 9959 | amy.yang@db.comOctober 11, 2024DB Fed Watcher: Officials support gradual easing path after close call in September2Fedspeak Who**TakeawaysBias*FOMC minutes (10/09)▪ ‘Almost all’ officials saw higher risks to labor market, lower inflation risks▪ ‘Substantial majority’ backed 50bps cut. ‘A few’ also could have supported smaller movePowell (09/30)▪ SEP shows two more 25bps cuts▪ GDP, income revisions ‘quite interesting’; removed downside risks▪ No hurry to cut quicklyJefferson (10/08,09)▪ Modest but ‘noticeable’ job market cooling. Decision meeting by meeting▪ Dual goals roughly in balanceWilliams (10/07,10)▪ Cut should happen ‘over time’▪ Growth @2.25%-2.5% in ‘24 & average @~2.25% over next 2 years▪ UR @4.25% by year-end and in ‘25▪ PCE@~2.25% in ’24, @~2% in ‘25▪ Dual risks in balance. Jobs report shows economy in good health▪ Sep cut not ‘rule of how we act’ in future; Data dependentBostic (10/03,08,10)▪ Keeps door open to skipping rate cut in November. See one more 25bps cut by year end in Sept SEP ▪ Fed can be patient. Case can be made for cutting at either or both remaining meetings this year ▪ Inflation still ‘quite a ways’ above 2%; a risk that the economy is too strong and hamper policy recalibrationFedspeak, continued Who**TakeawaysBias*Barkin (10/03,10)▪ Too early to declare victory over inflation; headed in the right direction▪ 12-month core inflation won’t drop much further until 2025▪ Hike should have started in 2021Goolsbee (09/30,10/03,04,10,11)▪ See gradual, a series of rate cuts over next 12-18 months▪ Jobs report ‘superb. Some signs inflation may undershoot 2% target▪ Try and maintain status quo; have time to figure out terminal rate▪ Agree with Powell on balanced risk▪ Likely more meetings with close calls in the near term▪ Overall trend confirms a falling inflation trajectoryMusalem (10/07)▪ Gradual rate reductions over time. See >= 1 more 25bps cut in ’24▪ Can cut faster if job market weakened more than expected▪ Cost of easing too much too soon greater than too late▪ Penciled in policy path ‘slightly above’ median in Sept SEP▪ Dual risks roughly balanced▪ Supported 50bps cut at Sep meeting▪ PCE inflation to c