While there was no surprise last week in terms of the Federal Reserve’s position on interest rates, there was a positive development in the shape of US inflation which came in surprisingly softer than expected.

May’s CPI reading showed inflation slowed to 3.3%, below April’s reading and below the consensus forecast of 3.4%, sending US shares up on the week.

Grocery prices were flat month-on-month, while car insurance, gasoline prices and air fares also fell, although Fed chair Jerome Powell warned investors against making too much of the numbers.

‘Readings like today’s are a step in the right direction, but it’s only one reading. You don’t want to be too motivated by any single data point’, cautioned Powell.

This week’s highlight should have been the Bank of England’s rate-setting meeting, but the bank said it would not make any changes to interest rates ahead of the general election so the focus has shifted to the September meeting where economists expect the first of two 0.25% cuts taking rates from 5.25% to 4.75% by year-end.

The tail end of this week sees the release of manufacturing and services PMI (purchasing managers’ index data) in the UK, Europe and the US showing the contrasting fortunes of the three regions, with the UK and the US firmly in ‘expansion’ territory on both measures while core Europe is still struggling with industrial sentiment cemented in ‘recession’ territory.

After a heavy fortnight of economic releases, the calendar eases somewhat next week with the odd consumer confidence reading and US housing market indicators and culminates with the latest ‘core’ inflation figure which is one of the Fed’s key inputs making it keenly anticipated. 

‹ Previous2024-06-20Next ›