Home Business News US CPI to provide the FOMC with further confidence in the disinflationary process

US CPI to provide the FOMC with further confidence in the disinflationary process

13th Jun 24 8:17 am

The May US CPI report is one that should provide the FOMC with some degree of further confidence in the disinflationary process back towards the 2% target, with headline CPI remaining unchanged on an MoM basis, for the first time since last June.

Furthermore, core CPI slipped further on an annual basis, hitting a more than 3-year low at 3.4%.

While such data will support the view that April’s cooler price data was not a one-off, it is unlikely, on its own, to provide the FOMC with enough confidence to deliver a rate cut just yet, with the next FOMC decision due later today.

Nevertheless, the data does lessen the chances of a hawkish shift in Chair Powell’s rhetoric at the post meeting press conference, even if the dot plot is likely to show a median expectation of 50bp, from 75bp, of cuts this year.

Markets, as near as makes no difference, now price 2 cuts as the most likely outcome, in line with our base case expectation, for cuts to begin in September, followed by another such 25bp reduction in December.

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