Macquarie analysts have expressed their belief that the latest at-consensus core CPI data may not be sufficient to trigger the Federal Reserve’s decision to initiate a countdown on a rate cut. Despite the report meeting expectations, the firm deems it to be lacking in significant impact. They have acknowledged that an in-line print of the CPI is unlikely to prompt the Fed to begin considering rate cuts. Additionally, Macquarie anticipates that Federal Reserve speakers will likely adopt a cautious approach in light of this data.
One significant point highlighted by Macquarie is the shift in trend observed in the recent US CPI report. The data indicated a reversal in the string of top-side surprises that have been prevalent since January. While certain aspects such as lower airfares and car prices were expected, the report also revealed unexpected elements like a rise in car insurance costs and an acceleration in recreation services expenditure.
According to Macquarie, the current core CPI print may not be substantial enough to prompt the Fed to consider a rate cut. Despite the +0.3% core CPI figure representing a relatively high rate, the three-month annualized CPI inflation still stands at a robust 4.1% as of April. Even after adjusting for certain factors to estimate the core PCE PI-equivalent, the inflation rate remains above the target set by the Fed. This indicates that inflationary pressures persist and are likely to influence the Fed’s decision on interest rates.
While the recent US CPI report has provided valuable insights into the state of inflation in the country, it may not be sufficient to sway the Federal Reserve towards a rate cut. Macquarie’s analysis suggests that the Fed will maintain a cautious stance based on the current data and is unlikely to initiate any immediate changes in interest rates. The intricate dynamics of the US economy and evolving inflationary trends will continue to shape the Fed’s future policy decisions.