To read the full Commentary, Click Here
Monthly Commentary as of 3.31.2024
Bond yields fell across most points along the yield curve in March. Modest price gains combined with good carry led to total return of 0.78% for the Bloomberg U.S. Intermediate Aggregate Index.
Lower yields came about despite a set of economic reports that still point to growth. While economic growth is welcoming news, too much growth could limit the trajectory of lower inflation which in turn could delay Fed rate cuts.
After the March FOMC meeting, both the Summary of Economic Projections and Powell’s news conference continued to signal three rate cuts this year. The apparent stalling of progress on inflation did not change their view, first expressed in December, that monetary policy is likely too restrictive and should be scaled back to prevent the economy from slipping into recession.
It is notable that this projection of three rate cuts was despite the Committee’s increase of its estimate of core PCE, the Fed’s favored inflation metric. The median forecast for core PCE for 2024 increased from 2.4% previously to 2.6%. Perhaps the Fed’s comfort with this level of inflation stems from the fact that housing-related inflation is one of the key factors restraining its rate of decline. Given the time lags in capturing rent changes and home prices, this component of the inflation data will likely remain sticky.
To read the full Commentary, Click Here
TC140999(0424)1