The bottom line is that pipeline price pressures still point to significant disinflation to come, especially from housing rents, with rents for new leases growing at rates below the pre-pandemic trend already for the past half year. This takes time to feed through to inflation, with past relationships suggesting a lag of around one year. The other key pipeline pressure is wage growth, but this also looks relatively benign.

Inflation is forecast to be somewhat higher in the near term, but this largely reflects the earlier rise in oil prices than we anticipated; our year-end forecast for inflation is essentially unchanged. 

With disinflation in our view very much on track, we therefore think the Fed remains on course to start lowering rates from June.