U.S. Inflation Data: A Breath of Relief?
When the Federal Open Market Committee (FOMC) crunches the numbers on Friday afternoon, the latest PCE (Personal Consumption Expenditures) report shows a slowdown that is definitely a sigh of relief.
- Core inflation – the heart of price pressures – ticked up only 2.6% year‑over‑year in May, the gentlest climb since April 2021.
- The monthly deflator crept up a modest 0.1%, the slowest pace since late‑last year.
These figures give the FOMC more confidence that the U.S. economy is inching toward a smoother, slower route out of the inflation maze.
Still no Guaranteed Cut Wickets
But let’s not get carried away. As they say, “one swallow doesn’t make a summer.” The May numbers won’t magically trigger a rate cut on their own. They do, however, inch the door a bit wider—just enough to keep the conversation going.
What Could Trigger the First Cut?
If inflation stays on a kind path and other data line up with the FOMC’s predictions through the summer, a 25‑basis‑point (bpp) hike could be on the table as early as September.
- Any uptick in unemployment, like the surge in the latest jobless claims (the highest level since November 2021), or a negative non‑farm payroll print before the meeting, could pressure the Fed to tighten for good.
The Pace of Easing
In general, the Fed’s approach will stay steady, not abrupt, unless there’s unexpected labor stress or an external shock. My baseline scenario? A total of 50 bpp in cuts this year, split between September and December.
Policymakers seem to have adopted a “slow and steady” mantra — they’re not ready for a fast‑track “victory lap.” The objective: keep policy tighter longer to make sure the inflation battle is won for good.
What to Expect Next?
- Keep an eye on the next PCE release and the unemployment claims saga.
- Watch for any signs that the economy might be slipping into a slowdown or that inflation suddenly spikes.
- Remember: each data point is a puzzle piece, and the overall picture is still emerging.
Dive into the numbers, stay tuned, and let’s see how the Fed decides the next move.
