1Michael Feroli (1-212) 834-5523michael.e.feroli@jpmorgan.comJPMorgan Chase Bank NADaniel Silver (1-212) 622-6039daniel.a.silver@jpmorgan.comMurat Tasci (1-212) 622-0288murat.tasci@jpmchase.comNorth America Economic Research23 February 2024J P M O R G A NPowell�s semiannual monetary policy testimony on March 6 is unlikely to depart too far from these themes, as there are no more major data releases between now and then. Next week is going to be much busier in terms of data releas-es. The January PCE price data will be important to watch and expectations are for firm prints to reflect strength in the related price data already shown in the CPI and PPI releases. We estimate that the headline PCE price index rose 0.4% in January (2.4%oya) while the core PCE price index jumped 0.5% (2.9%oya). We will also get a variety of January GDP source reports that we expect to generally be weak, with declines anticipated for real consumer spending, construction spending, and durable goods orders. January should set up a weak starting point for economic activity in 1Q. While we do believe that growth is slowing, we think that the January weakness likely exaggerates the cooling trend given harsh winter weather during the month and potential issues with seasonal adjustment. Automaker reports on February sales should give an early signal that activity picked up that month following the weak January, with the sales rate expected to firm in February after it dropped off in January.Fed staying patientThe minutes to the late January FOMC meeting reinforce the patient approach to cutting rates that Powell voiced in the post-meeting press conference. While only “a couple� of meeting participants noted the downside risk to growth from waiting too long to cut, “most� participants noted the risk of moving too quickly. Consistent with the statement released after the meeting, participants noted that risks to achieving their employment and inflation goals are coming into better balance, but they are still highly attentive to inflation risks. Indeed, much of the policy discussion in these minutes repeated themes already mentioned in the statement and press conference. If that weren�t enough to make these minutes less useful, the discussion is a little dated given the subsequent news on employment and inflation. In any event, there�s noth-ing here to make us rethink our call for a first cut in June.There was a short discussion of QT in which it was men-tioned that balance sheet reduction was running smoothly, and that at the March meeting they would “begin in-depth discussions of balance sheet issues� to guide an “eventual� decision on when to slow the pace of run-off. Given this lei-surely-sounding schedule, we pushed back our expectations for the announcement of a reduction in the monthly caps from the March meeting to the June meeting. Fed speak...
