Bassanese Bites: Biding time – June 17 2024
Global markets – week in review
Global stocks continued to rally last week – leaving April’s mini-pullback well behind – on the back of a lower-than-expected US CPI and the prospect of eventual US rate cuts.
As alluded to above, the two key global highlights last week were the US CPI and the Fed meeting. The good news was that the US CPI was better than expected, with core prices up only 0.2% (market expectation 0.3%). Also surprising on the downside were producer prices later in the week. Both of these results bode well for a benign PCE inflation (the Fed’s preferred inflation measure) later this month.
All up, there is encouraging news to suggest the upside US inflation surprises earlier this year are now behind us, which hopefully also could be reflective of local inflation trends.
More mixed news came from the Fed meeting, with the dot plot of expected future policy changes suggesting only one rate cut this year – down from an expected three rate cuts previously. Markets (and myself) were hoping for the Fed to still pencil in two rate cuts this year, but the disappointment was partly offset by the Fed now anticipating four rate cuts in 2025 instead of only three.
What’s more, the Fed released fairly conservative inflation forecasts which did not seem to factor in recent good inflation news (annual core PCE inflation, for example, is expected to end this year at the current annual rate of 2.8%) – so there appears ample room for downward inflation revisions later this year and potentially more than one US rate cut.
