(Bloomberg) – The latest marker of underlying price pressures in the United States will offer little hope of settling the debate among Federal Reserve officials over whether they have made enough progress on inflation to lift the brakes on monetary policy.
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The Fed’s preferred price measures on Friday are expected to show inflation remained elevated in April, exceeding more than double the central bank’s target. Minutes from its early May meeting on Wednesday could help shed some light on officials’ appetite to stay up next month.
This week, various Fed officials indicated that they are keeping an open mind when assessing economic data as well as strains in the banking sector. Dallas Fed chief Lorie Logan said she was not yet convinced officials should ignore a rate hike next month, while Governor Philip Jefferson said patience was in order.
Read more: Powell leads policy debate with clear signal on June rate break
The price index for basic personal consumption expenditures, which excludes the often volatile food and energy components, is expected to climb 4.6% from a year ago, matching the annual advance of the previous month. On a monthly basis, the basic measure is expected to rise 0.3% for a second month.
The personal income and spending report is also expected to show that inflation-adjusted consumer spending remained weak at the start of the second quarter. That helps explain why economists expect the U.S. economy to cool further after growing at a 1.1% pace in the first quarter.
What Bloomberg Economics says:
“The Fed’s favorite inflation gauge will show little to no progress on inflation over the past month, and May’s final reading of the University of Michigan’s long-term inflation expectations will confirm whether the reading preliminary high was a coincidence or not.”
—Anna Wong, Stuart Paul, Eliza Winger and Jonathan Church. For a full analysis, click here
Other U.S. data this coming week includes new home sales and durable goods orders for April, as well as revised first-quarter gross domestic product data.
St. Louis Fed President James Bullard and Mary Daly of San Francisco are scheduled to speak on Monday, while Raphael Bostic of Atlanta and Thomas Barkin of Richmond will discuss disruptive technologies at a conference.
Meanwhile, the standoff over the US debt limit is approaching a critical deadline, with June 1 the last day scheduled for the US to pay its bills in full.
Farther north, Canadian payrolls data will reveal a detailed picture of earnings, employment and hours worked in March, as some fear rising wages could hamper efforts to curb inflation.
And elsewhere, German data will reveal whether the country finally succumbed to a recession in the first quarter, while UK inflation is likely to have slowed markedly. Among multiple rate decisions, New Zealand could rise further.
Click here to see what happened last week and below is our summary of what is happening in the global economy.
Asia
The Group of Seven summit in Hiroshima ends on Sunday with economic security including the diversification of supply chains among the key issues on the agenda.
Central bankers in New Zealand, South Korea and Indonesia will make their final rate decisions this week as an intense global wave of inflation-fighting policy tightening draws to a close.
The Reserve Bank of New Zealand is expected to make at least an additional 25 basis point hike after five percentage points of hikes since late 2021.
Bank of Korea and Bank of Indonesia have already been on hold since the beginning of the year and should hold their ground again.
Chinese banks are likely to keep key rates unchanged on Monday, but pressure is mounting on the central bank to ease policy as the rebound weakens.
Policymakers in Singapore and Malaysia will also be keeping an eye on the latest price data to check the pace of cooling inflation in their economies.
CPI figures from Tokyo on Friday will indicate the national trend in Japan. The deputy prime ministers of Singapore, Vietnam and Thailand as well as the leaders of Sri Lanka and Laos will speak at a media event in Tokyo later this week.
Europe, Middle East, Africa
The health of the German economy will take center stage this week with multiple reports that could illustrate lingering malaise.
Among them, the purchasing managers’ indices for the euro zone and its main members will be released on Tuesday. The Ifo survey of German business confidence will be released on Wednesday, with declines in all major measures expected by economists.
And on Thursday, a new estimate of German gross domestic product will be released. Given the weak recent data, economists will be watching for a possible downward revision that could mean a contraction in the first quarter. Such an outcome would imply that a recession that many thought the country had escaped has finally happened.
Several European Central Bank officials will speak this week, including President Christine Lagarde, as they mark the 25th anniversary of the establishment of the institution in 1999.
Meanwhile, in the UK, a major drop in the inflation rate is predicted by economists, although with a median forecast of 8.2% the result will only underline the challenge facing the Bank of England is always faced.
Elsewhere, several central bank decisions are expected across the region in the coming week:
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On Monday, the Bank of Israel is expected to carry out an unprecedented 10th consecutive rate hike on Monday in an attempt to dampen stubbornly high inflation.
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Also on Monday, Ghanaian officials are likely to leave the benchmark unchanged as inflation is expected to continue to moderate.
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A day later, the Hungarian central bank could start lowering the highest key rate in the European Union.
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On Wednesday, the Central Bank of Nigeria is expected to extend its longest round of monetary tightening in over a decade.
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Also on that day, an Icelandic move could potentially lead to another rise.
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Turkey will most likely keep rates at 8.5% on Thursday, halting its hike cycle ahead of a runoff presidential election this month where President Recep Tayyip Erdogan seeks to extend his two decades in power.
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On the same day, South African policymakers are expected to raise the policy rate by 50 basis points, amid significant rand weakness and persistent inflation in an economy flirting with recession.
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And on Friday, Eswatini, whose currency is pegged to the South African rand, will likely rise as well.
Latin America
In a very light week in the region, market expectations surveys from Brazil and Mexico are underway for Monday, along with weekly trade data from Brazil.
In Peru, the first quarter output report is expected to show the economy slumping from the previous three months as well as the same period a year earlier, as high inflation, tight financial conditions and political unrest is taking its toll.
The mid-month reading of Brazil’s core inflation index could see the year-over-year print hovering around 4%, within the central bank’s target range and very close to l target of 3.25%.
Paraguay’s central bank will likely keep its key rate at 8.5% even though inflation is currently down to 5.3% and seems on track to return to the 4% target.
Mexico releases proxy data for March GDP and the final first-quarter production reading, which should highlight the resilience of Latin America’s second-largest economy. Mid-month inflation readings will likely show a further slowdown to put the year-over-year print not far off 6%, even if the core reading is more than a percentage point higher. .
–With help from Jeremy Diamond, Andrea Dudik, Robert Jameson and Sylvia Westall.
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