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US rate cuts: Cooling core inflation will offer minimal relief to Fed



By Vince Golle and Craig Stirling


Underlying US inflation probably moderated in April for the first time in six months, offering a ray of hope that price pressures will start to ease again after a string of upside surprises. 


The core consumer price index, which excludes food and fuel, is seen rising 0.3 per cent from a month earlier after 0.4 per cent advances throughout the first quarter. The Bureau of Labor Statistics will issue its CPI report on Wednesday.

Compared with April 2023, the core CPI is projected to rise 3.6 per cent. While that annual increase would be the smallest in three years, it’s still running too fast to placate Federal Reserve policymakers, who want evidence inflation is slowing consistently as they debate the timing of interest-rate cuts. 

The overall CPI probably climbed 0.4 per cent for a third straight month as gasoline prices reached a six-month high. While core goods prices have largely been retreating, underlying services costs remain elevated and explain why inflation proved stubborn in the first quarter.

Part of the difficulty the Fed has had in bringing inflation down toward its 2 per cent goal rests with the resilient American consumer. Retail sales in February and March advanced solidly, although economists’ projections for April suggest households took a breather. Those figures are also due on Wednesday.

On Tuesday, economists will parse the government’s report on producer prices to assess the impact of categories such as health care and portfolio management that feed into the Fed’s preferred inflation gauge — the personal consumption expenditures price index.

Other reports in the coming week include housing starts and industrial production for April.

Fed Chair Jerome Powell is scheduled to speak Tuesday at a foreign bankers event in Amsterdam. Regional Fed presidents Loretta Mester of Cleveland and Raphael Bostic of Atlanta — who both vote on policy this year — are also slated to speak. 

What Bloomberg Economics says:


“April’s core CPI report could appear encouraging – we expect it to decelerate from March – but we see a meaningful likelihood that the month’s core PCE reading, a greater concern for the Fed, could still come in robust.”

—Anna Wong, Stuart Paul, Eliza Winger and Estelle Ou, economists.

Turning north, Canadian data on existing home sales for April will reveal whether the spring market is heating up as buyers anticipate rate cuts. Housing starts, manufacturing and wholesale data will also be released. 

Elsewhere, numbers on the strength of the Chinese and Japanese economies, wage data in the UK and the latest European Union forecasts will keep investors busy in coming days.



China publishes a slew of data Friday that’s expected to show the second quarter got off to a solid start, with growth in industrial output, retail sales and fixed asset investment accelerating year on year. 

But the housing slump will continue to pose risks, with property investment seen falling more than 9 per cent. 

Japan’s economy is estimated to have contracted in the first quarter on falling private consumption and business investment, as well as the first negative contribution from net exports in a year. Those numbers are due on Wednesday.


Growth will likely bounce back in the second quarter thanks to recovering auto output, according to Bloomberg Economics. 

On Friday, Malaysia reports gross domestic product numbers. 

Australian wage growth probably picked up a tad in the first quarter, with the unemployment rate forecast to have ticked higher to 3.9 per cent in April. 

Trade statistics are due in Indonesia and Singapore, and the central bank in the Philippines is expected to hold its benchmark rate at 6.5 per cent on Thursday. 

Europe, Middle East, Africa


The UK will take the spotlight with labour-market data that may encourage policymakers watching for waning inflation pressures.

Average weekly earnings, excluding bonuses, probably rose an annual 5.9 per cent in the first quarter, according to the median estimate of economists. 

While still robust, the continuing downward shift would cheer Bank of England officials, two of whom voted on Thursday for an immediate reduction in borrowing costs against seven who favoured no change.


In the wake of that decision, speeches by UK policymakers will draw attention. Among them, the BOE’s chief economist Huw Pill is scheduled to speak on Tuesday. 

Over in the euro zone, the calendar features several European Central Bank officials. Governors from the Netherlands, Germany, France and Italy are among those set to speak. The ECB’s half-yearly financial stability review will arrive on Thursday. 

Germany’s ZEW investor confidence number on Tuesday will be a highlight in a quieter week for data. The final report on April euro-area inflation will be published on Friday. 

The Brussels-based European Commission will release economic forecasts for the region on Wednesday, including projections for growth, inflation, debt and deficits. 

In Sweden, where the Riksbank delivered a rate cut on May 8 and pledged more this year, minutes of that decision will be released on Wednesday, along with the latest inflation reading.


GDP numbers from Norway and Poland will be published in the coming week. 

Romania’s central bank on Monday may deliver its first rate cut in three years as inflation gradually subsides there. The country’s latest consumer-price and growth numbers are also due in the coming days. 

Further east, Russia’s inflation is likely to have stayed close to 7.7 per cent, based on the economy ministry’s weekly data. GDP numbers, meanwhile, may show growth picked up in the early months of 2024. 

Bloomberg Economics estimates the Russian economy expanded by 5 per cent year-on-year in the first quarter, from 4.9 per cent in the prior three months, buoyed by war spending and consumer confidence.

Turning south, Israel’s inflation probably slowed to 2.5 per cent, further evidence that the country’s war on Hamas has had little impact on cost-of-living increases.

In Nigeria, consumer-price growth is predicted to have accelerated to over 34 per cent in April, partly due to a threefold increase in electricity prices for some urban consumers.

Elsewhere in Africa, two central bank decisions are due: 

  • Zambia’s policymakers on Wednesday will probably raise the key interest rate for a sixth straight meeting to support the kwacha, which is trading at record lows against the dollar.

  • Angola’s monetary authority may follow suit on Friday and lift its benchmark for a second time in a row to combat inflation that’s expected to continue to surge due to the scaling back of fuel subsidies.

Latin America


Colombia’s economy may have eked out a slight expansion in the first quarter, powered by stronger-than-expected output in February.


The central bank has raised its 2024 growth forecast to 1.4 per cent from 0.8 per cent while cutting next year’s estimate to 3.2 per cent from 3.5 per cent. 

Industrial output, manufacturing and retail sales data, which have gone 12 months without posting a positive reading, are also on tap. 

Brazil’s economy picked up at year-end and remained solid in the first two months of 2024. February’s GDP-proxy print was slightly better-than-expected on the back of a minimum wage hike and government income support to lower income households.

Peru’s GDP-proxy figures for March may have lost some momentum after a higher-than-expected print in February.

The economy is forecast to rebound from its 2023 recession but the damage has been done: Peruvians living in extreme poverty hit an 11-year high last year.

In Uruguay, inflation of 3.68 per cent, firmly within the central bank’s target range, may prompt policymakers to trim borrowing costs for a second straight meeting from the current 8.5 per cent on Thursday.


Argentine President Javier Milei’s so-called shock therapy for the country’s crisis-plagued economy is getting results on the inflation front.

Analysts now see an April month-on-month print of 9 per cent, down from the 13 per cent forecast in January, with the year-end reading almost 66 percentage points lower at 161.3 per cent.

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