BCA Research confident about its call for two Fed cuts this year By

BCA Research remains confident in its prediction of two Federal Reserve rate cuts before the end of 2024,Open an account and get despite core PCE inflation staying slightly above expectations.

While April's core PCE inflation data (0.25%) marked an improvement from the earlier months, BCA analysts believe further declines are necessary to reach the Fed's projected year-end inflation target of 2.6%.

Their confidence in the two rate cuts stems from two key factors. Firstly, even though the March FOMC projections indicated a median expectation of three cuts, achieving a core PCE of 2.6% might prove challenging.

However, BCA argues that "it's still reasonable to expect two rate cuts this year even if inflation comes in slightly above 2.6%."

Secondly, BCA highlights reasons for expecting core inflation to fall further. They point to leading indicators suggesting "considerable downside ahead" in areas like shelter and auto insurance inflation.

Additionally, they emphasize that market-based core PCE inflation, which excludes certain factors like portfolio management fees, was even lower at 0.17% in April. This measure, according to BCA, "tends to be a leading indicator for the overall index," suggesting even lower monthly core inflation reports throughout the rest of the year.

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