There is growing concern that the economy may slow down at a faster rate than anticipated, but the speaker is not yet seeing any signs of it picking up. Any weakening that may be occurring is happening very gradually, and in the long term, it will be necessary for the economy to slow down in order to reach the desired inflation target. The speaker is considering the possibility of only one interest rate cut this year and is closely monitoring the situation to see how things progress.
The speaker predicts that inflation will reach its target by 2026, but there are some secondary measures in the inflation numbers that are causing concern about a potential slower movement. Despite these concerns, the speaker is not in a rush to disrupt the current economic dynamics as long as inflation remains on track. Employment contacts have not expressed any worries to the speaker, who has a reputation for taking a more hawkish stance.
The speaker highlights certain aspects of the inflation numbers that are concerning, particularly those related to rising percentages of goods in the CPI basket growing at rates above 3% and even 5%. This trend bears resemblance to past high-inflation periods and must be closely monitored to ensure it does not lead to upward pricing pressure before any decisions regarding policy rates are made.
