What Data Dependency Could Mean For The Fed's Economic Projections?

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Photo by Juan Rumimpunu on Unsplash

Data suggests the Fed will need to revise its GDP and core PCE Inflation expectations higher.

Coming off last week’s market strength and the revised figure for 4Q 2023 GDP coming in at 3.2%, investors are taking a more cautious tone ahead of tomorrow’s January PCE Price Index data and Friday’s February Manufacturing PMI reports. The growing concern is the data will reinforce a slow path to the Fed’s 2% inflation target even though the economy continues to grow above trend.

As these data points are digested, the market will start contemplating potential revisions to the Fed’s Economic Projections, which in December called for GDP of 1.4% in 2024 with core PCE Inflation at 2.4%. Recent data suggests the Fed will need to revise that GDP forecast higher and potentially do the same for its core PCE inflation figure as well. Should tomorrow and Friday’s data reinforce that thought, it stands to reason market expectations for the start of rate cuts may slip further. Per the CME FedWatch Tool, the current thinking is the first rate cut will be in June, but we would point out that thinking is only by a modest margin.

  • Apple (AAPL) will wind down its team working on electric cars ending an effort to challenge Tesla (TSLA) and others. The company has other automotive-related projects, including its infotainment CarPlay software, which Apple says is installed on 80% of new vehicles. With that off the table, Apple can concentrate on applying AI to its current products, including the iPhone and iPad, and avoid falling further behind tech peers.

  • Taser maker Axon Enterprise (AXON) forecast full-year revenue ahead of Wall Street estimates, banking on strong demand for its software products and recently launched Taser 10. The company expects full-year 2024 revenue between $1.88 billion and $1.94 billion, compared with analysts' expectations of $1.88 billion, according to LSEG data.

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