Weekly Signal & Noise Filter

The Narrow Path to a March Cut

“In 2024, the Fed will have to navigate the between the Scylla of strong H1 growth and the Charybdis of a growing disinflationary impulse”.

The above was written on these pages on December 18, 2023.  Since then, the most relevant data points have confirmed the above.

• Q4 2023 GDP printed at 3.3% vs expectations of 2.1%.

• The initial estimate for Q1 2024 GDP from the Atlanta Fed is 3%.

• Core PCE printed at its lowest 3-month and 6-month averages since November and September 2020, respectively.

At this point, a bat can see growth is strong and inflation is declining.

Note the symmetrical shape of these annualized inflation prints.

Current consensus expectations are for a hot January core PCE print somewhere between .3% and .4% MoM.  

Below is a matrix that shows how 3-month and 6-month annualized rates, as well as YoY rates, would evolve as a result of either one of these two prints.