ResearchDeutsche BankAmy Yang | (+1) 212 250 9959 | amy.yang@db.comFebruary 23, 2024Fed Watcher: Easing into policy easingDeutsche BankResearchAmy YangEconomist(+1) 212 250 9959 | amy.yang@db.comMatthew LuzzettiChief US Economist(+1) 212 250 6161 | matthew.luzzetti@db.comBrett RyanSenior Economist(+1) 212 250 6294 | brett.ryan@db.comJustin WeidnerEconomist(+1) 212 469 1679 | justin-s.weidner@db.com Avik ChattopadhyayResearch Associateavik-a.chattopadhyay@db.comFebruary 23, 2024IMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS LOCATED IN APPENDIX 1. MCI (P) 041/10/2023. UNTIL 19th MARCH 2021 INCOMPLETE DISCLOSURE INFORMATION MAY HAVE BEEN DISPLAYED, PLEASE SEE APPENDIX 1 FOR FURTHER DETAILS.Distributed on: 23/02/2024 23:36:05 GMT7T2se3r0Ot6kwoPaResearchDeutsche BankAmy Yang | (+1) 212 250 9959 | amy.yang@db.comFebruary 23, 2024DB Fed Watcher: Easing into policy easing2FedspeakWho**TakeawaysBias*FOMC minutes (02/21)▪ Most officials noted the risk of cutting too quickly; a couple noted downside risks of staying too high▪ B/S talks in March to guide ‘eventual decision’ to slow the runoff pace▪ Several noted the inflation risk from easier financial conditionsJefferson [3] (02/22)▪ Excessive easing could cause progress to stall or reverse. Rate cuts “later this year”. Need body of evidence. ‘Cautiously optimistic’ ▪ Disinflation process likely bumpy▪ Nimble & vigilant to adverse shocks▪ Continued resilient consumption, geopolitical conflicts as upside risks to the inflation ▪ Careful as job market can quickly change▪ ‘Perhaps’ potential growth has risenWaller [4](02/22)▪ Still seeing cuts in ’24, no urgency. Delaying cuts a few months shouldn’t have big impact▪ Seeks at least a couple more months of inflation data to verify the progress ▪ Risk of waiting a little longer to ease policy is lower than the risk of acting too soon and possibly halting or reversing the progress we've made▪ ‘Predominately upside risks’ on inflationFedspeak, continued Who**TakeawaysBias*Daly [3](02/16)▪ 3 rate cuts in 2024 is ‘reasonable’. Favors gradual policy adjustment with patience and flexibility▪ Recent data within normal bounds of volatility, Progress ongoing but more to do. Last leg of inflation fight might not be hardest▪ R* b/w 0.5 and 1Bostic [2](02/15,16)▪ Still saw 2 cuts for ’24 from summer. Could be 3 with positive data. No urgency to cut with strong data▪ Surprised by Jan CPI, nothing major▪ Need more evidence that inflation headed sustainably to 2%▪ No victory yet, bumpy road ahead; geopolitics biggest risk to outlookGoolsbee[1] (02/14)▪ Inflation can be bit higher but still on track to 2%; same low prints likely too stringent a bar▪ Inflation goal based on PCE, not CPI▪ Last mile of inflation fight might not be the hardestHarker [3](02/22)▪ Warns against rushing through cuts▪ Steady, slow easing once cuts start▪ Look for ‘a couple ...
