On December 21st, Citigroup economist Andrew Hollenhorst believes that the Federal Reserve may be at a loss. Due to a 0.1% month on month increase in core PCE in November, price increases are slowing down, and the final rate cut by the Federal Reserve may exceed current expectations. In our basic assumption, a weak labor market would lead to the Federal Reserve cutting interest rates at every subsequent meeting. This view contradicts the market’s expectation that the Fed will pause interest rate cuts in January. But even if we are wrong, the sideways unemployment rate and slowing inflation are enough reasons to cut interest rates at least every meeting outside of January
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