The Fed's Commitment to 2% Inflation in 2024 Is a Good Thing

The market has been very keen to move forward to pricing in rate cuts. The strength of the economic data in the beginning of 2023 increases the probability that the Fed will keep policy at terminal throughout this year. We remain remarkably agnostic on whether or not inflation is structurally higher during this cycle, but we anticipate Powell is willing to engage in excess demand destruction simply to regain some of the credibility that the Fed lost during 2022.