The Fed's "favorite" inflation indicator is good again! Gold rushed above the 2350 mark

Golden Ten New Media

2024-05-31 20:57Published in Guangdong

After a setback in the disinflationary trend in the first quarter, the report could provide Fed officials at least some comfort about the path of inflation.

Data released on Friday showed that the Federal Reserve's favored measure of core inflation in the U.S. slowed in April, a step in the right direction for policymakers who are now seeking confidence that they can start cutting interest rates.

The core PCE price index in the United States recorded an annual rate of 2.8% in April, unchanged from the previous month; In addition to the 0.2% monthly rate, the lowest since December 2023 and lower than the expected 0.3%, the US personal spending recorded 0.2% in April, which also fell sharply from 0.8% in the previous month.

After the release of the data, spot gold rushed above the 2350 mark, and the dollar index fell nearly 20 points in the short term.

Greg Michalowski, an analyst at the financial website Forexlive, said that the first reaction to the release of the data was that inflation was slightly lower, with the core PCE falling to 0.2% m/m (but the core PCE y/y rate not rounded up was 0.249%, so it means that the m/m rate should be between 0.2% and 0.3%), and the real personal consumption expenditures also fell to -0.1% m/m. This indicates a slowdown in economic growth.

The report comes as markets have been adjusting to the prospect of the Federal Reserve keeping interest rates at bay for longer than initially feared.

After a setback in the disinflationary trend in Q1, the report should provide Fed officials with some comfort on the path of inflation. According to CME Group's Fed Watch tool, investors are pricing in a roughly 50% chance of the Fed cutting rates for the first time in September, and swap traders still expect the Fed to cut rates at least once this year.

Fed officials have repeatedly said they are waiting for greater confidence in the decline in inflation before it is appropriate to cut interest rates. On Thursday, New York Fed President Williams said he thinks inflation will start to fall again in the second half of 2024.

Williams said in a speech at the Economic Club of New York, "I think some of the recent inflation data represents primarily a reversal of the unusually low data for the second half of last year, rather than a disruption in the overall downward direction of inflation." ”

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