Fed joins easing cycle with a bang – TDS

The Fed is joining the global easing cycle, and the focus is now shifting to the relative pace of tapering, TDS macro analysts note.

Headline inflation will rise in the coming months

“While the relative timing of the first central bank cuts has been an important theme in markets over the past few months, the focus is now shifting to the relative pace of cuts, and here we see the Fed starting late and going faster. We see little reason why faster Fed tapering will spill over to other major central banks in the near term, but risks tilt to the downside in 2025 as inflation risks fade.”

“Despite sour sentiment in some regions, growth forecasts for next year have generally been revised upwards across the G5 over the past three months (the US being the exception). This is reflected to some extent in our global demand factor, which has come off its lows, although it still has some way to go back into positive territory.”

“Headline inflation will rise in the coming months in most economies. While it is mainly driven by base effects that central bankers will be looking at, it risks undoing some of the recent improvement in household inflation expectations.”