🏦🔻Analysts Expect Rate Cuts Later This Year: Cable FX Macro

• The decline in US 5-year breakeven inflation rates is a meaningful reduction in market-implied inflation expectations over the medium term, driven largely by the sharp drop in oil prices and softer incoming data expected to pull headline CPI lower in the coming months. Strategists are growing more confident that inflationary pressures are cooling enough to allow the Federal Reserve to shift its focus to supporting growth and the labor market as energy costs ease and forward-looking metrics like 5-year breakevens move closer to or below the Fed's 2% target.

• The dynamic has led a growing number of analysts to include, or advocate for, rate cuts later this year, viewing the combination of anchored inflation expectations and signs of economic softening as creating the conditions for policy easing without the risk of reigniting price pressures. Thus, lower breakevens are both a leading indicator of reduced inflation risk and a green light for the Fed to deliver the monetary relief that markets are increasingly looking for.