Powell’s semi-annual testimony to Congress has not provided any further clues on the Fed’s policy rate path. Powell confirmed that policy rates have peaked and that he expects to cut this year, but the FOMC needs to see more data to gain confidence that inflation is heading sustainably toward its 2% target.  

We continue to pencil in the first rate cut in June. Once started, we expect the Fed to continue with one cut of 25 bps per quarter. 

Since our new economic forecasts assume a Trump victory in November, leading to a universal import tariff, we expect inflation to rebound in 2025, leading to a pause in the Fed’s cutting cycle during the course of next year.