The Fed’s preferred inflation benchmarks are poised to show the most moderate monthly gains since late last year, a springboard for officials to begin reduce interest rates, possibly as early as September.
Economists expect no change in the personal consumption expenditures price index for May and a minimum increase of 0.1% in the basic measure that excludes food and energyaccording to median projections from a Bloomberg survey of economists.
The report, which will be published on Friday, is also expected to show annual advances of 2.6% in both the general and basic indicators.. The expected increase in the underlying measure, which provides a better picture of underlying inflationit would still be the smallest since March 2021.
Since their last meeting, Federal Reserve 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 that progress before lowering rates.
At the same time, the labor market –the other part of the dual mandate of the Federal Reserve– continues to move forward, although at a slower speed. A healthy labor market is giving authorities some flexibility over the timing of interest rate cuts.
The latest inflation figures will be accompanied by personal spending figures which will inform outlays on services after recent retail sales data showed a lower appetite for goods. The median forecast foresees a slight acceleration in nominal personal consumption and income.
What Bloomberg Economics says:
“We don’t think slower inflation will be enough to convince officials at the time of the July Fomc meeting that inflation is on a firm path toward the Federal Reserve’s 2% target.”
Other data coming next week include readings on consumer confidence in June and reports on contract signings in May for the purchase of new and used homes. In addition to the third estimate of first-quarter economic growth, the government will release figures on durable goods orders for May.
In Canada, central bank governor Tiff Macklem will speak in Winnipeg, May consumer price data is expected to show a decline in core inflation for a fifth month, and A release of April gross domestic product along with a preliminary estimate for May will also provide crucial insight.
In other places, Inflation figures in three major eurozone economies may also encourage officialswhile the central banks of Sweden and Mexico will likely keep rates unchanged.
