Despite encouraging recent inflation data, the ESR Group believes the Federal Reserve will need to see several consecutive cool reports to gain confidence that inflation is sustainably returning to its 2% target.
Given ongoing resilience in nonfarm payroll growth and volatility in inflation readings, the ESR Group now anticipates only one Fed rate cut this year, in December, down from the previously projected two cuts.
The labor market is showing signs of a gradual slowdown, with the unemployment rate increasing to 4% in the June report. However, this cooling in the job market has not yet translated into improved housing affordability or increased sales activity.
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