**As seen in Risk In The Week report 06/09/24, subscribe at cablefxm.co.uk/reports
The Fed will most likely leave rates unchanged this week, as policymakers are expected to express that further patience is needed to bring prices back to target. The labour front will be in focus as the Fed may not have to wait for prices to hit 2% before easing policy, any signs of softness will be welcomed. It will be interesting whether the Fed focuses on strong headline employment or the more recent rise in the unemployment rate. The balancing of their data-dependency equation showed policymakers willing to tighten more if needed, and Fed's Waller said he would need to see several more months of good inflation before cutting rates. Despite Q1 upside surprises in headline CPI, annualized core PCE was revised lower to 3.7% over the first three months of the year. Progress flags were hidden after the May jobs report pushed traders to no longer price in a rate cut before December.
The desk at Citi changed its first Fed rate cut forecast to September from July, their revision came after the jobs report surprised analysts, they added this contrasts indicators showing a slower U.S. economy. Analysts at UBS said the Fed will have some months to assess the ECB's latest rate cut, they added that sources of inflation in both Europe and the U.S. were similar, and the Fed may take note of the impact of easing in Europe. BofA analysts summarized possible scenarios for the upcoming batch of Fed projections, they noted a two interest-rate cut dot plot for 2024 could be interpreted as dovish. BofA warned that if the dots point to only one rate cut, this will be a hawkish surprise and could push the dollar higher.
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