The Federal Reserve’s favorite inflation stickers are poised to show the monthly improvement since late last year — a stepping stone for officials to start cutting interest rates, possibly as soon as September.
Economists expect no change in the consumer price index for May and a slight 0.1% gain in the core measure excluding food and energy, based on the median estimate in a Bloomberg survey of economists.
The report, due on Friday, is also expected to show a 2.6% year-on-year improvement in both the overall and core gauges. The expected increase in the headline rate, which paints a better picture of underlying inflation, will remain very small from March 2021.
Since their last meeting, Fed officials have said that while they are encouraged by the decline in other inflation data – including the consumer price index – they need to see months of such improvement before cutting rates.
At the same time, the labor market — another part of the Fed’s dual mandate — is still contracting, albeit at a slower pace. A healthy labor market gives policymakers some flexibility during interest rate cuts.
The latest inflation numbers will be accompanied by personal spending statistics that will inform you about the cost of the service after the latest sales data shows the popularity of the merchandise. The median forecast calls for a slight acceleration in personal consumption and income.
What Bloomberg Economics said: “We don’t think that slowing inflation will be enough to convince officials at the FOMC’s July meeting that inflation is on pace to reach the Fed’s 2% target.” —Estelle Ou, Stuart Paul and Eliza Winger, economists.
Among the data next week are readings on June consumer confidence and reports on May contract signings for both new and pre-owned home purchases. In addition to a third estimate of economic growth in the first quarter, the government will release durable goods orders figures in May.
In Canada, central bank Governor Tiff Macklem will speak in Winnipeg, consumer price data for May is expected to show an increase in core inflation for the fifth month, and the output of the gross domestic product in April and the quick estimate for May will provide. important understanding.
Elsewhere, inflation numbers for the three biggest euro-zone economies are likely to cheer officials, while central banks in Sweden and Mexico are likely to keep interest rates on hold.
Click here for what happened this past week and below for our upcoming roundup of the global economy.
In Asia
Asia begins with the release of minutes from this month’s Bank of Japan policy board meeting.
This document is getting a lot of interest after the authorities promised to reduce bond purchases, and also said that investors will have to wait until the end of July before getting information about the level of reduction. Plans may emerge on Monday.
Elsewhere, Reserve Bank of Australia Assistant Governor Christopher Kent is speaking on Wednesday and Deputy Governor Andrew Hauser later in the day, focusing on any new hawkish strategies after the governor said the board would consider the trip at its meeting this month.
They spoke after data on Wednesday was expected to show inflation in Australia rose in May.
Japan will see the best indicator of national inflation trends with the release of the Tokyo CPI gauge in June. Bloomberg Economics expects headline inflation to grow to 2.1%, boosted by rising utility prices after the government cut energy subsidies.
Other nations that publish price updates include Malaysia, Singapore and Uzbekistan.
In other data, China’s industrial profits on Thursday may reflect the benefits of official pressure on equipment development, and trade figures are due during the week in New Zealand, Vietnam, Sri Lanka, Thailand and Hong Kong.
South Korea receives two indicators that point to domestic demand through retail sales and consumer confidence.
Meanwhile, China and the European Union have agreed to start discussions about the organization’s plans to impose tariffs on electric vehicles bought in the Asian country.
Europe, Middle East, Africa
The Riksbank’s decision on Thursday will be historic, with Swedish officials expecting economists to halt their rate-cutting cycle after the first rate cut last month – predicting a similar move expected to keep the European Central Bank on hold in July.
As policymakers become more confident that Sweden is closer to getting inflation under control, they may agree to two more cuts this year to shore up an economy that EU officials predict will post the weakest growth in the entire bloc.
Here’s a quick look at some of the central bank’s decisions in the wider area:
- On Wednesday, Zimbabwe is expected to lower its key rate for the first time since introducing a new currency, the ZiG, in April to fight inflation.
- Czech policymakers may cut borrowing costs by 25 or 50 basis points on Thursday, while stopping short of saying inflation has been hit.
- On the same day, Turkey’s central bank will likely hold its rate at 50% as it waits for consumer price growth to slow from last month’s figure of 75%. Officials are confident that borrowing costs will begin to decline significantly in the second half.
In the euro area, inflation data from three of its four main sources is due at the end of the week. Reports are expected to show a slowdown in France and Spain, with price growth remaining weak in Italy.
Those numbers could provide a boost to authorities after last month’s retreat, when inflation rose more than expected across the region. The ECB’s survey of consumer price expectations will also be released on Friday.
Other reports include the Ifo Business Index for Germany on Monday, which is expected to show a gradual improvement in sentiment among companies in the regional economy.
Policymakers scheduled to speak include Bank of France Governor Francois Villeroy de Galhau, whose economy is under intense scrutiny by investors ahead of upcoming legislative elections. Appearances by ECB Chief Economist Philip Lane and the heads of the central banks of Germany and Italy are also on the calendar.
In the UK, on the other hand, the officials of the Bank of England – whose decision on June 20 came close to a possible reduction in August – will continue to avoid communicating with the public before the general election on July 4. The details will include the final release of GDP for the first quarter on Friday, including the current account numbers .
Turning to Africa, Zambia’s growth figures for the first three months of 2024, due on Thursday, reveal another impact of a severe drought. Drought is expected to reduce growth to 2.5% this year from 5.2% in 2023.
The next day, Kenya’s inflation rate for June will provide another indication of the impact that floods and heavy rains have had on food prices there.
Latin America
Mexico’s central bank receives its final consumer price reading on Monday ahead of Thursday’s monetary policy decision, and the data may leave the Banco de Mexico very unhappy. As the inflation rate rises again and drifts above the target, Banxico is sure to remain at 11% for the second meeting.
The central bank is the focus on Brazil as it releases the minutes of its June 18-19 monetary policy meeting on Tuesday and its quarterly report on Thursday. Sandwiched between the two is the mid-month reading of the benchmark consumer price index.
Keeping the key rate at 10.5% came as no surprise, although the tone of the post-decision discussion has raised a few eyebrows.
Argentina’s economy is likely to fall into a technical recession as early as 2024, with deep quarterly and annual declines. Analysts polled by Bloomberg see a year-over-year decline of 5.4%, the biggest drop since the pandemic began.
While much of the region’s inflation targeting central banks may be sidelined or increasingly hawkish, Colombia’s BanRep is expected to drop half a point to 11.25% – 200 basis points down from last year’s 13.25% – and is on track to end . in 2024 by 8.5%.
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