We maintain our baseline view that the Fed Funds Rate (FFR) has peaked. US Federal Reserve officials appear to be gravitating toward the view that policy is now restrictive enough to get inflation back to 2%. 

As confidence in peak rates builds, the question for policymakers is how long they will need to hold rates at that level. Ongoing strength in activity, employment and some inflation components imply no quick pivot.

We now expect the FOMC to first cut rates in Q3 2024. By then, we expect core inflation to be on a sustainable path towards target and there would be no reason for the FOMC to squeeze the economy with higher real rates.