U.S. Economic Outlook: Trust the Process

The summer has kicked off with some excitement about central banks starting their cutting cycles, but the Federal Reserve is not among them. While other advanced economies can justify easier policy on the basis of slower inflation and growth worries, the resilience of the U.S. economy is holding rates higher for longer. Hiring continues while layoffs have been limited, and wage gains are outpacing inflation. Consumption and investment are settling into steady, sustainable paces. The Fed’s ability to be patient is a luxury afforded by a positive economic context.

If benign inflation reports multiply, we believe the Fed will be on track for a first cut in September. However, the margin for error has eroded; another surprise from the data could push easing further off into the future. We, and the Fed’s decision makers, are taking the data one month at a time, with hope for the soft landing still intact.

Following are our thoughts on recent data and developments.


Key Economic Indicators