We think July was the last hike of the cycle, and that benign core inflation readings will give the FOMC the confidence to keep policy on hold over the coming months.

We continue to expect the Fed to start cutting rates from next March. Falling inflation will push real rates higher, and the recent jump in bond yields also represents a significant tightening in financial conditions.

Even with rate cuts starting next year, monetary policy is expected to remain restrictive throughout 2024 and even into 2025.