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[Nick, 6/7/2024, Wall Street Journal, “Why the Recession Still Isn’t Here”, , Accessed 7/14/24, GDI JK]

The recession, predicted by business executives, economists, and investors, refuses to show up.

[Francesco, 7-8-2024, Reuters, “Global economy finds new ways to keep growing,” https://www.reuters.com/breakingviews/global-economy-finds-new-ways-keep-growing-2024-07-08/#:~:text=Despite%20widespread%20predictions%20of%20a,in%20an%20ideal%20economic%20environment., accessed 7-12-2024, CM]

LONDON, July 8 (Reuters Breakingviews) - The world economy is defying the Cassandras. Despite widespread predictions of a slowdown, global GDP growth is accelerating. The United States is still the star performer but as it flags other regions are picking up the slack. Risks of damaging geopolitical confrontations abound. But for now investors can bask in an ideal economic environment.

[Lawrence, 7-9-2024, Seeking Alpha, “It is Time for Powell to Lead,” https://seekingalpha.com/article/4703133-it-is-time-for-powell-to-lead, accessed 7-14-2024, CM]

What is required to see that happen is impeccable execution by Chairman Powell and the Federal Reserve in adjusting monetary policy. They should have the information they need over the coming month to affirm that the rate of inflation will fall to target by year end, allowing them to begin their rate-cut cycle no later than September. In the New York Fed's latest survey, consumers' inflation expectations for the coming year fell for a second month in a row to 3%, which is consistent with pre-pandemic levels.

(Matt, CNN, 7-10-24, “The US economy faces a new threat”, CNN, https://www.cnn.com/2024/07/10/business/economy-inflation-jobs-fed/index.html, accessed 7-14-24)

Just as inflation continues to cool, yellow lights are flashing in the still-strong jobs market. The Federal Reserve must now confront the risk that it’s making a mistake by keeping interest rates too high for too long.

(Jean, “What Is the Relationship Between Inflation and Interest Rates?”, Investopedia, https://www.investopedia.com/ask/answers/12/inflation-interest-rate-relationship.asp, accessed 7-14-24)

Inflation and interest rates tend to move in the same direction, because interest rates are the primary tool used by the U.S. central bank to manage inflation.

(Tobias, 5-15-23, “The Role of Inflation Expectations in Monetary Policy”, International Monetary Fund, https://www.imf.org/en/News/Articles/2023/05/15/sp-role-inflation-expectations-monetary-policy-tobias-adrian, accessed 7-14-24)

To this day, central banks remain very attentive to ensuring that measures of long-run inflation expectations (market and survey-based) remain near their targets, and for good reasons. These measures provide a key signal of central bank policy credibility. They are also critical for monetary policy transmission through financial market channels. Moreover, they are typically viewed as important in affecting short-term inflation dynamics. Even now, central bank models, such as the FRB model for the US economy, focus on long-run inflation expectations.

[Jeanna, 6-28-24, The New York Times, “The Fed Preferred Inflation Measure Cools, Welcome News”, , accessed: 7-14-24, AngH]

The Personal Consumption Expenditures index climbed 2.6 percent in May from a year earlier, matching what economists had forecast and down from 2.7 percent previously.

[Rachel, 7/11/24, Washington Post, “Inflation eased further in June, helping cement path to rate cuts”, https://www.washingtonpost.com/business/2024/07/11/cpi-inflation-fed/, accessed 7/14/2024, LR]

The risk, though, is that the Fed keeps interest rates too high for too long — essentially prioritizing the inflation fight over the job market. That delicate balance has the financial markets, economists and families nationwide eager for the Fed to cut.

[Rachel, 7/11/24, Washington Post, “Inflation eased further in June, helping cement path to rate cuts”, https://www.washingtonpost.com/business/2024/07/11/cpi-inflation-fed/, accessed 7/14/2024, LR]

Policymakers have been waiting to cement their confidence that inflation is gradually easing. Barring any surprises, economists and Fed watchers quickly rallied around a cut at the central bank’s mid-September meeting.

[Rachel, 7/11/24, Washington Post, “Inflation eased further in June, helping cement path to rate cuts”, https://www.washingtonpost.com/business/2024/07/11/cpi-inflation-fed/, accessed 7/14/2024, LR]

Inflation eased more than expected in June, handing Federal Reserve officials another dose of encouraging data as they inch closer to cutting interest rates and giving long-awaited relief to households and businesses.

[ Paul & Peter, 7/11/24, New York Times, “Is America Getting Interest Rates Wrong?”, https://www.nytimes.com/2024/06/11/opinion/interest-rates.html, accessed 7/14/2024, LR]

Krugman: Even though recent inflation data has diminished my worries on that front and I would support rate cuts, I’m kind of surprised to be not all that dovish. If you had argued against cuts, though, I probably would have pressed the case for them, just to keep things interesting.

[Alicia, 7-11-2024, CNN Business, “Prices fell in June for the first time since the start of the pandemic,” https://www.cnn.com/2024/07/11/economy/us-cpi-consumer-inflation-june/index.html, accessed 7-12-2024, CM]

(CNN) — Americans weighed down by fast-rising prices for three years just received more encouraging news on the inflation front.

(Ann & Howard, “June price drop may shorten the Fed's last mile on inflation”, Reuters, https://www.reuters.com/markets/us/traders-boost-bets-fed-rate-cut-sept-after-cpi-data-2024-07-11/, accessed 7-14-24)

CHICAGO, July 11 (Reuters) - The "last mile" of the Federal Reserve's battle against inflation may have shortened to a last lap after U.S. consumer prices unexpectedly fell in June, shoring up policymakers' confidence that they are winning the fight and paving the way to interest-rate cuts in coming months.

[Howard, 7-10-2024, Reuters, “Fed's Cook: US data consistent with a soft landing,” https://www.reuters.com/markets/us/feds-cook-us-data-consistent-with-soft-landing-2024-07-10/, accessed 7-12-2024, CM]

July 10 (Reuters) - U.S. inflation should continue to fall without a significant further rise in the unemployment rate, Federal Reserve Governor Lisa Cook said on Wednesday.

[Jeanna, 7-9-2024, The New York Times, “Powell Welcomes Cooling Inflation but Wants ‘More Good Data’ Before Rate Cut,” https://www.nytimes.com/2024/07/09/business/economy/powell-inflation-rate-cut.html, accessed 7-9-24] nikoglenn

Jerome H. Powell, the chair of the Federal Reserve, indicated on Tuesday that recent inflation data had given the central bank more confidence that price increases were returning to normal, and that continued progress along these lines would help to pave the way toward a central bank rate cut.

(Christopher, “US inflation cools again, potentially paving way for Fed to cut interest rates soon”, Associated Press, https://apnews.com/article/inflation-prices-rates-economy-federal-reserve-biden-8d15ca77433a1ae072a1e63dfc089f24, accessed 7-14-24)

WASHINGTON (AP) — Inflation in the United States cooled in June for a third straight month, a sign that the worst price spike in four decades is steadily fading and may soon usher in interest rate cuts by the Federal Reserve.

(Jeff, “Fed Chair Powell says holding rates high for too long could jeopardize economic growth”, CNBC, https://www.cnbc.com/2024/07/09/fed-chief-powell-says-holding-rates-high-for-too-long-could-jeopardize-economic-growth.html, accessed 7-14-24)

Federal Reserve Chair Jerome Powell on Tuesday expressed concern that holding interest rates too high for too long could jeopardize economic growth.

(Krystal, “A big change could come to the US economy in September”, CNN, https://www.cnn.com/2024/07/12/investing/premarket-stocks-trading-fed-september-cut/index.html, accessed 7-14-24)

US consumer prices fell in June for the first time since the early months of the pandemic. Fresh data Thursday revealed that consumer prices dropped 0.1% from May. On an annual basis, inflation eased to 3% last month from 3.3% in May.

(Dr. Richard Haass,4-22-20, NPR’s On Point, “International Relations In The COVID-19 Era: Richard Haass On What Comes After A Pandemic”, Interview with Meghna Chakrabarti and Jack Beatty on NPR’s On Point, 4/22/2020, , accessed 7-14-24)

So suddenly, the world is being left on its own. And what we're seeing is the world is not on autopilot. It doesn't self-organize. And that's the most worrisome thing going forward that this pandemic is both a reflection, but also an accelerant of that because the United States has not rallied the world to meet the challenge posed by this pandemic. And instead, we've pulled back we become much more national, kind of an island power, the rest of the world, it's on its own, it's not doing very well. And this is this is the reason I'm so worried that a lot of the trends that were in place, including them on America, much less involved in the world, nationalism, populism, the breakdown of international collaboration, all those things were in train before this pandemic, and now we're seeing them double down.

(James Lee, Tyler Powell, David Wessel, 11-30-20, “What are inflation expectations? Why do they matter?”, Brookings Institute, , accessed 7-14-24)

Inflation expectations are simply the rate at which people—consumers, businesses, investors—expect prices to rise in the future. They matter because actual inflation depends, in part, on what we expect it to be. If everyone expects prices to rise, say, 3 percent over the next year, businesses will want to raise prices by (at least) 3 percent, and workers and their unions will want similar-sized raises. All else equal, if inflation expectations rise by one percentage point, actual inflation will tend to rise by one percentage point as well.