Post Fed rate cut last week, longer term interest rates are bouncing back upward just as I suspected they would. And over the next few weeks, I believe they’ll regain the downward momentum to hit yet another low for this cycle. You can see from the chart that the daily movement illustrated by each “candlestick” is contained within a nice tidy downward channel that should continue for the next few months, leading rates to drop another 1/2% by the end of 2024.
One more note on the Fed: their favorite inflation gauge, Personal Consumption Expenditures (PCE) was released this morning. The headline number increased by 0.1% from the prior month, but decreased 0.3% to 2.2% year over year, which was slightly below expectations. Core PCE, which excludes the things we hardly ever use like food and energy, increased by 0.1% month over month–which was below the + 0.2% estimate. The year-over-year reading increased by 0.1% to 2.7% which matched expectations. In summary, though the YOY core calculation hit the anticipated mark, every other measure shows that inflation continues to cool, and this fact will help interest rates to do the same.
