Since then, Hatzius and his honchos have slowly but surely folded to the market's view, with his latest note proclaiming with no smile on their face that growth will be better than they expect in 2019 and 2020 BUT… pushing back their forecast for the next hike from 2020Q1 to 2020Q4.
The 'excuses' that Hatzius et al. use this time for their even-more-dovish tilt – despite rosier growth forecasts – are simple: no-flation and Trump.
While the growth news has been encouraging, the inflation numbers have surprised to the downside. Following this morning's PPI report, we now expect year-on-year core PCE inflation to slow to 1.64% in the March print and to end 2019 at 1.9%, vs. the 2.1% we had expected just a few weeks ago (Exhibit 2).