Barclays now expects Fed to start cutting rates in March

Following this morning’s soft PPI data and yesterday’s CPI data, Barclays said the data imply that core PCE averaged 1.9% SAAR in the last six months of 2023. Given that the recent PCE inflation data, which is “the FOMC’s preferred inflation measure,” have been close to the Fed’s objective, the firm nows expects the FOMC to cut policy rates 25 basis points every other meeting starting in March, versus previously expecting rate cuts to start in June. The firm is also lowering the expected path for the funds rate, as it sees the Fed bringing the fed funds target range to 4.25-4.50% by the end of 2024 and 3.25-3.50% by end 2025.