Dan Silver joins Nora Szentivanyi to discuss the outlook for US core inflation and implications for the Fed.  The trend for core  inflation moderated in 2023 but the CPI and PCE measures sent differing signals about how close inflation was to target late last year. We expect core CPI run rates to slow to 2.9%ar in 1H24 alongside a modest firming in core PCE inflation to a still low 2.2%ar. If our forecast is correct, year-ago core PCE inflation could dip below 2.5% as soon as the February report (released in late March) and enable the Fed to start easing in May/June. However, with tailwinds from the unwinding of supply chain shocks fading, some softening in the labor market will likely still be needed to keep inflation close to the 2% target on a sustainable basis. 

Speakers

This podcast was recorded on 6 Feb 2024.

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