Expected Acceleration of U.S. Inflation in May May Strengthen Rate Hike Bets

SadaNews - The latest data on the inflation index most closely monitored by the Federal Reserve is unlikely to pose a challenge to the growing consensus within the U.S. central bank regarding the need to raise interest rates this year.

The Personal Consumption Expenditures Price Index, set to be released on Thursday, is expected to show an acceleration both month-on-month and year-on-year in May.

This report will conclude a month of poor inflation data, after previous releases illustrated how the impact of the energy shock spread throughout the economy.

The Federal Reserve Eyes U.S. Inflation

Kevin Warsh, who led the first monetary policy meeting as the new chair of the Federal Reserve on Wednesday, declined to provide any signals to reporters regarding his personal views on prices or interest rates.

This stance may give greater significance to comments from his colleagues at the Federal Reserve, as investors seek more information regarding short-term monetary policy direction.

Among the key statements anticipated next week in this regard is a speech by New York Federal Reserve President John Williams at a seminar on June 25, and a separate appearance by Austan Goolsbee from the Chicago Federal Reserve on the same day during a different event. Minneapolis Federal Reserve President Neel Kashkari will participate in a panel discussion on June 26.

Bloomberg Economics Experts' Opinion:

"The June FOMC meeting, with half of the committee members leaning toward a more hawkish monetary policy path, sent a hawkish shock to the markets. Although Warsh did not add his own forecasts to the dot plot, his tone in the press conference appeared notably hawkish to us. A hot reading on the Personal Consumption Expenditures Price Index is likely to reinforce that hawkish message".. Anna Wong, Stuart Paul, and Eliza Winger.

Other expected U.S. data releases include updates on new home sales on Wednesday, durable goods orders on Thursday, and international trade figures for goods on Friday, all for the month of May. The University of Michigan will also present the final results of its June consumer sentiment survey on Friday.

In Canada, data scheduled to be released on Monday is likely to show inflation accelerating to 3% in May, as gasoline prices continue to rise, while the core index remains weak. The Bank of Canada will issue a summary of the discussions that led to keeping interest rates unchanged this month on Wednesday, after stating it would look past the effects of a short-term rise in costs.

On another front, the Purchasing Managers' Indexes in Japan and the UK, the testimony of the President of the European Central Bank, and monetary policy decisions in Thailand and Mexico will be closely watched.