Macro Briefing: 8 February 2024

* Fed officials offer cautious outlook on expectations for rate cuts
* China deflation deepens in January–prices fall at fastest rate in 15 years
* US trade deficit narrowed in 2023 by the most since 2009
* CBO projects US federal budget deficit at 6.1% of GDP for 2025 vs 2024’s 5.6%
* US GDP Q1 nowcast via Atlanta Fed’s GDPNow model in line with Q4’s increase:

Wall Street sees rate cuts in the months ahead, but the track record for predicting the Fed’s target rate is usually wrong. “Every day you don’t see softer growth data is another day that cuts are pushed back,” says Mike Best, a high-yield-bond portfolio manager at Barings in Charlotte, NC. “At the start of the year, if you said there won’t be any rate cuts this year, people would’ve looked at you as if you had three heads. Now, it’s a real possibility.”

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