Rate Cuts This Year Unlikely As Fed Gets Closer To 2.0% Target

We still expect that the Fed's preferred core PCED inflation measure will fall to the Fed's 2.0% target by the end of this year (chart). It was already down to 2.8% y/y in April. May's number will be released on Friday, and should show further progress.

We don't see the Fed cutting the federal funds rate (FFR) this year, which should keep the 10-year yield above 4.00% in the second half of 2024. Here's our take on the latest relevant developments and Fedspeak:

(1) Rent inflation. Rent inflation continued to moderate through May in the CPI (chart). It should do the same in May's PCED report on Friday.