13 June 2023
If you are covering US inflation, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“The Fed will be pleased to see inflation come in lower than expected for May, giving it a bit of breathing room to pause rates in the foreseeable future. Core inflation remains a little stickier than it would like, but given its recent rises it too will be happy with the move downwards.
“The US economy has been incredibly resilient in the face of high inflation, and this fall back to more normal levels will be especially welcome and may just help consumer spending hold up at a time where we are seeing a few wobbles. Talk of recession is becoming increasingly unlikely, but growth will still be challenging to come about. The Fed will be acutely aware of this and won’t want to act too quickly in cutting rates. As a result, it will be comfortable to pause on rates at this point, but assuming a significant amount of cuts by the end of the year may be a little optimistic, particularly as we are still awaiting the true effect of the rate rises of the last year.
“Wednesday’s interest rate decision will give a good indication of the future direction of travel, but for now today’s inflation rate shouldn’t present any surprises to effect the immediate course of action. A pause at tomorrow’s meeting will bring a sigh of relief to markets.”
