The Federal Reserve’s favored inflation gauge is poised to show its weakest monthly rise since late last year, providing a springboard for officials to begin cutting interest rates, possibly as early as September.
Economists expect the May consumer price index to remain unchanged and for the core measure, which excludes food and energy, to rise by at least 0.1%, based on the median forecast of a Bloomberg survey of economists.
Friday’s report is expected to show year-on-year growth of 2.6% in both headline and headline indicators. The expected increase in the core measure, which paints a better picture of core inflation, will remain the weakest since March 2021.
Since their last meeting, Fed officials have said that while they are encouraged by declines in other inflation data, including the Consumer Price Index, they need to see months of such progress before cutting rates.
At the same time, the labor market—the other part of the Fed’s dual mandate—is still operating, albeit at a slower pace. A healthy labor market gives policymakers some flexibility in timing interest rate cuts.
The latest inflation data will be accompanied by personal spending data, which will provide insight into spending on services after recent retail sales data showed less appetite for goods. The average forecast assumes a slight acceleration in nominal personal consumption as well as income.
What Bloomberg Economics says: “We don’t think the slowdown in inflation will be enough to convince policymakers by the time of the July FOMC meeting that inflation is on a sustainable path down toward the Fed’s 2% target.” —Estelle Ou, Stuart Paul and Eliza Winger, economists.
Other data in the coming week includes June consumer confidence data and May contract signing reports for both new and pre-owned homes. In addition to the third estimate of economic growth in the first quarter, the government will release durable goods orders data for May.
In Canada, central bank chief Tiff Macklem will speak in Winnipeg, consumer price data for May is expected to show a fifth month of decline in core inflation, and gross domestic product data for April along with the forecast for May will also provide information. decisive understanding.
Elsewhere, inflation figures in the eurozone’s three biggest economies could also give officials some encouragement, while the central banks of Sweden and Mexico are likely to keep rates unchanged.
Click here because what happened last week and below is our understanding of what is happening in the global economy.
Asia
Asia gets things started with the release of minutes from the Bank of Japan’s board of directors’ policy meeting this month.
Interest in the document increased after authorities promised to reduce bond purchases and also said investors would have to wait until the end of July to get details on the scale of the cuts. Clues may appear on Monday.
Reserve Bank of Australia assistant governor Christopher Kent will speak on Wednesday, followed by deputy governor Andrew Houser a day later, with the focus on any new hints of hawkishness after the governor said the board had considered a rate hike at its meeting this month.
They spoke as data on Wednesday was expected to show Australian inflation rose in May.
Japan will see a leading indicator of national inflation trends with the release of the Tokyo Consumer Price Index for June. Bloomberg Economics expects inflation in the capital to rise to 2.1%, helped by rising utility prices after the government cut energy subsidies.
Other countries also publish updated price information: Malaysia, Singapore and Uzbekistan.
Other data said China’s industrial profits on Thursday could reflect benefits from the official push for equipment upgrades, with trade statistics to be released during the week in New Zealand, Vietnam, Sri Lanka, Thailand and Hong Kong.
South Korea receives two indicators that point to domestic demand: retail sales and consumer confidence.
Meanwhile, China and the European Union agreed start negotiations about the bloc’s plans to introduce duties on electric vehicles imported from the Asian country.
Europe, Middle East, Africa
The Riksbank’s decision on Thursday will be a highlight as economists expect Swedish officials to pause the easing cycle after initially cutting rates last month, foreshadowing a similar move the European Central Bank is expected to maintain in July.
As policymakers become increasingly confident that Sweden is closer to reining in inflation, they could ratify a path for two more cuts this year to prop up an economy that EU officials forecast will post one of the weakest recoveries in the bloc.
Here’s a quick look at other central bank decisions in the wider region:
- Zimbabwe is expected to cut its key rate on Wednesday for the first time since the introduction of the new currency. ZiGin April to combat deflation.
- Czech policymakers may cut borrowing costs by 25 or 50 basis points on Thursday, but will not say that inflation was beaten.
- On the same day, Turkey’s central bank is likely to keep rates at 50%, anticipating a slowdown in consumer price growth compared to last month. figure 75%. Officials are confident that borrowing costs will begin to decline fall significantly in the second half.
In the eurozone, inflation data for three of the four largest economies will be released towards the end of the week. Reports are expected to show a slowdown in price growth in France and Spain, while price growth in Italy will remain weak.
The figures could provide encouragement to officials after a setback last month when inflation across the region accelerated more than expected. The ECB’s survey of consumer price expectations will also be published on Friday.
Other reports include Germany’s Ifo business confidence index on Monday, which is expected to show a further gradual improvement in sentiment among companies in the region’s largest economy.
Among the politicians, a speech is scheduled by the Chairman of the Bank of France, François Villeroy de Gallo, whose economy will soon become the object of close attention from investors. upcoming legislative elections. The calendar also includes speeches by ECB chief economist Philip Lane and the heads of the central banks of Germany and Italy.
Meanwhile in the UK, Bank of England officials, whose June 20 decision came close potential rate cut in August — will continue to avoid public communication ahead of the July 4 general election. The data includes the final first-quarter GDP release on Friday, including current account figures.
In Africa, Zambia’s economic growth statistics for the first three months of 2024, due out on Thursday, could show some of the effects of the devastating drought. The drought is expected to cut economic growth to 2.5% this year from 5.2% in 2023.
The next day, Kenya’s June inflation will provide further insight into the impact flooding and heavy rains there were food prices.
Latin America
Mexico’s central bank receives the latest consumer price data on Monday ahead of its monetary policy decision on Thursday, and the data is likely to leave Banco de Mexico completely unimpressed. With inflation warming again and continuing above target, Banxico is almost certain to remain at 11% at the second meeting.
The central bank is in focus in Brazil as it releases minutes from its June 18-19 monetary policy meeting on Tuesday and a quarterly inflation report on Thursday. Between these two indicators lies the monthly average of the core consumer price index.
Maintaining the key rate at 10.5% was not a surprise, although the relatively soft tone of the communiqué after the decision raised some eyebrows.
Argentina’s economy likely fell into a technical recession at the start of 2024, with deep quarter-on-quarter and year-on-year contractions. Analysts polled by Bloomberg forecast a 5.4% year-on-year decline, the biggest decline since the pandemic.
While many of the region’s other major inflation-targeting central banks are either sidelined or increasingly hawkish, Colombia’s BanRep is expected to cut half a point to 11.25% – 200 basis points below last year’s peak of 13 .25% – and is on its way to completion. 2024 at 8.5%.