'Pretty weak' case for Fed rate cuts in the near-term, says JPMorgan's Michael Feroli

Summary

Michael Feroli, JPMorgan chief U.S. economist, argues the case for near-term Fed rate cuts is weak. He cites core PCE inflation above 3%, strong fourth-quarter GDP signals, and a labor market where 0-50k monthly job growth may be the new normal. He expects the FOMC to revise up its neutral-rate estimate and the market to gradually reset toward fewer cuts, while acknowledging recession tail risk remains a wildcard.

• Feroli sees no near-term Fed rate cuts and says the case for cuts is weak.
• He points to core PCE inflation above 3% and strong retail sales and GDP data.
• He argues high-3s rates are not restrictive given strong markets and growth.
• He expects the FOMC to revise up its neutral-rate estimate, reducing cut odds.
• He believes the market can gradually reset expectations toward fewer cuts.
• He calls 0-50k monthly job growth the new normal due demographics and immigration.
• He says unemployment's upward momentum has been arrested recently.
• He acknowledges recession tail risk could lead to much more Fed cutting.