10 May 2023
If you are covering the latest US inflation data, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“The Federal Reserve will be breathing a sigh of relief after last week’s hot labour statistics have been followed up with a slightly lower than anticipated inflation print today – albeit only fractionally lower than expectations. This should present the Fed with all it needs now to hit the pause button on the rate rises and reassess its position over the coming months. With inflation in the US now below 5% for the first time in two years, markets will be thinking the light at the end of the tunnel is getting brighter, and the worst of this inflation is far in the rear-view mirror.
“That said, inflation remains well above the target level, and core inflation is proving stickier. As a result, rate cuts towards the end of the year cannot be taken as a given, and much of it will depend on what the Fed does next. It will be hoping that the latest interest rate rise is enough, and that this feeds into the economy in the next couple of months. Indeed, credit conditions have been tightening even more, and concerns still linger about the health of the regional banking system in the US. The Fed will be keeping a close eye on events and as has been proven over the course of the last three years, nothing can be taken for granted. In the immediate term, a pause now seems on the cards, but beyond that remains as volatile as ever.”
