(Bloomberg) — The Federal Reserve’s preferred inflation benchmarks are poised to show the most moderate monthly gains since late last year, a springboard for officials to begin cutting interest rates, possibly as early as September.
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Economists expect no change in the personal consumption expenditures price index for May and a minimal 0.1% increase in the core measure that excludes food and energy, according to median projections from a Bloomberg survey of economists.
The report, which will be published on Friday, is also expected to show annual gains of 2.6% in both the general and core indicators. The expected rise in the core measure, which offers a better picture of core inflation, would remain 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 Federal Reserve’s dual mandate – continues to advance, 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 to the Fed’s 2% target.”
—Estelle Ou, Stuart Paul and Eliza Winger, economists. For the full analysis, click here
Other data 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.
Elsewhere, inflation figures in three major eurozone economies may also encourage officials, while central banks in Sweden and Mexico will likely keep rates unchanged.
Click here to see what happened last week and below you’ll find a summary of what’s coming up for the global economy.
Asia
Asia begins with the release of minutes from this month’s Bank of Japan board meeting.
The document is drawing increased interest after authorities pledged to reduce bond purchases, while saying investors will have to wait until the end of July before getting details on the scale of the reductions. Clues may emerge on Monday.
Elsewhere, Reserve Bank of Australia Deputy Governor Christopher Kent speaks on Wednesday and Deputy Governor Andrew Hauser a day later, with attention focused on any further signs of a hawkish stance after the governor said the board considered an increase at its meeting this month.
They speak after data on Wednesday is expected to show Australian inflation rose in May.
Japan will see a leading indicator of national inflation trends with the release of the Tokyo CPI indicator for June. Bloomberg Economics expects inflation in the capital to have risen to 2.1%, driven by a rise in utility prices after the government cut energy subsidies.
Other countries publishing pricing updates include Malaysia, Singapore and Uzbekistan.
In other data, China’s industrial gains on Thursday may reflect the benefits of an official push to upgrade equipment, and trade statistics are due out during the week in New Zealand, Vietnam, Sri Lanka, Thailand and Hong Kong.
South Korea gets two indicators that point to domestic demand with retail sales and consumer confidence.
Meanwhile, China and the European Union agreed to start talks on the bloc’s plans to impose tariffs on electric vehicles imported from the Asian nation.
Europe, Middle East, Africa
Thursday’s Riksbank decision will be a highlight as economists widely expect Swedish officials to pause their easing cycle after an initial rate cut last month, foreshadowing an anticipated similar move for the European Central Bank to remain in place. suspended in July.
As authorities grow increasingly confident that Sweden is getting closer to controlling inflation, they could ratify a path of two more cuts this year to boost an economy that EU officials predict will record one of the weakest expansions. of the entire block.
Here’s a quick look at other central bank decisions in the broader region:
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Zimbabwe on Wednesday is expected to cut its key rate for the first time since it introduced a new currency, the ZiG, in April to combat deflation.
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Czech authorities may reduce borrowing costs by 25 or 50 basis points on Thursday, stopping short of saying inflation has been defeated.
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On the same day, Turkey’s central bank will likely keep its rate at 50% as it expects consumer price growth to slow from last month’s 75% figure. Officials are confident that borrowing costs will begin to fall significantly in the second half.
In the euro zone, inflation data in three of its four largest economies will arrive towards the end of the week. Reports are expected to show a slowdown in France and Spain, and price growth is expected to remain weak in Italy.
Those figures may offer encouragement to officials after last month’s setback, when inflation accelerated more than expected across the region. The ECB survey on 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 businesses in the region’s largest economy.
Among the policymakers who will speak is Bank of France Governor Francois Villeroy de Galhau, whose economy is under intense scrutiny from investors ahead of upcoming legislative elections. Also scheduled to appear are the ECB’s chief economist, Philip Lane, and the heads of the central banks of Germany and Italy.
“We could be threatened by new price shocks,” Executive Board member Isabel Schnabel said on Sunday. “That is why we are on alert and have not previously committed to a fixed rate, but continue to rely on data.”
Meanwhile, in the UK, Bank of England officials (whose June 20 decision moved closer to a possible rate cut in August) will continue to avoid public communications ahead of the July 4 general election. The data there includes the final GDP release for the first quarter on Friday, including current account figures.
As for Africa, Zambia’s growth statistics for the first three months of 2024, due to be released on Thursday, may reveal some of the impact of a devastating drought. The drought is expected to reduce the expansion to 2.5% this year from 5.2% in 2023.
The next day, Kenya’s June inflation will give a further indication of the impact the floods and heavy rains have had on food prices there.
Latin America
Mexico’s central bank will receive its latest consumer price reading on Monday ahead of Thursday’s monetary policy decision, and the data will likely not leave the Bank of Mexico completely impressed. With inflation heating up again and moving even further above the target, Banxico will almost certainly hold steady at 11% for a second meeting.
The central bank is in the spotlight in Brazil as it releases minutes from its June 18-19 monetary policy meeting on Tuesday, as well as its quarterly inflation report on Thursday. Sandwiched between the two is the mid-month reading of the benchmark consumer price index.
Keeping the key interest rate at 10.5% was not a surprise, although the relatively soft tone of the statement following the decision caught attention.
The Argentine economy likely fell into a technical recession in early 2024, with deep quarter-on-quarter and annual declines. Analysts surveyed by Bloomberg see a year-over-year drop of 5.4%, the biggest drop since the pandemic.
While many of the region’s other major inflation-targeting central banks are sidelined or increasingly aggressive, Colombia’s BanRep is expected to cut by half a point to 11.25% (200 basis points below the maximum). from 13.25% last year) and is on track to end 2024 at 8.5%.
–With help from Brian Fowler, Robert Jameson, Laura Dhillon Kane, Piotr Skolimowski, Monique Vanek and Paul Wallace.
(Updates with Schnabel in the EMEA section)
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