Interesting take from a Fed governor on where rate cuts might be heading this year. So the baseline thinking is probably three cuts, but there's a real possibility the FOMC could go for four if things soften up enough.

What caught my attention is the inflation picture they're laying out. Even before the geopolitical tensions ramped up, the composition of inflation was already getting trickier for the Fed to manage. But here's the thing - they're still seeing a path where core goods prices and housing inflation keep cooling down. The expectation is that 12-month PCE could be sitting near that 2% target within a year.

The war stuff adds uncertainty, sure, but the Fed's assessment seems to be that it hasn't fundamentally shifted the inflation outlook for the next 12-18 months. That's actually pretty significant if you think about it. And crucially, there's no evidence of wage-price spiral dynamics kicking in - long-term inflation expectations remain anchored, which is what really matters.

So the FOMC is basically saying: we see a path to cuts, probably three this year maybe four if conditions allow, but we're watching the risk distribution around our baseline forecast pretty carefully. The geopolitical stuff has widened the range of possible outcomes, but it hasn't derailed the core inflation narrative yet. That's the key takeaway for how rate decisions might actually play out through the FOMC's calendar this year.