We continue to suspect we will see persistent but moderate pass-through of higher input costs to US consumers by US corporates, which will keep inflation above target.
Our US inflation leading indicators for both core and headline CPI have rolled over but remain above the Fed’s inflation target at >3% annualized. PPI in both goods and services is also still running at close to 3% annualized.
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Regional Fed surveys in manufacturing continue to show higher expectations for future prices, while services future price expectations remain in a normal range.
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Alongside our US growth LEI running at 2% annualized, this implies >5% nominal GDP. This is a healthy rate of growth that would normally NOT warrant the market to price in another 4 Fed cuts over the next year and a terminal rate of 3% by 4Q26.