Plot Twist

The U.S economy seemed headed for a fairy-tale ending in late 2023. Inflation was cooling and economic growth had begun to moderate after a series of interest rate hikes by the Federal Reserve.

But the narrative has taken a turn in 2024. The economy and labor market have maintained a heady pace. Measures of inflation have either stalled or are showing signs of reflation, leading to a significant repricing of expected rate cuts by the Fed.

As the last mile of the inflation recovery proves to be the hardest, the higher-for-longer outlook has taken hold. Sticky inflation has delayed but not derailed rate cuts. While the soft landing is still our base case, it may take longer than expected to materialize.

Following are our thoughts on recent data and developments.

key economic