By Scott Hallermann.

With interest rate risk still at the forefront in assessing the banking sector outlook, I note 2 key events preceding the June 14 FOMC meeting. This Friday we will get the April PCE data. Then the May CPI data will be reported June 13. My expectation is that following those reports, the current Fed Funds rate will continue to be higher than contemporary core inflation measures allowing the Fed to pause its hiking cycle for the first time since March 2022.

In the interim, economic data continues to indicate slow to moderate growth with some acceleration in the 2nd quarter from the start of the year. While the consumer weakens, commercial activity is showing signs of life. Private Investment has significantly contracted in 3 of the last 4 quarters but is now showing the most strength since 4Q21. Within the segment Residential Investment surprisingly rebounded and is tracking to its first positive quarter since 1Q21.

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