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On the last trading day of the week, month, quarter and six months, the market breathed a sigh of relief after inflation figures from the US showed annual price growth of 3.8 per cent in May.
PCE, which stands for “personal consumption expenditures”, is closely followed by the Federal Reserve as a basis for calculating inflation and is often referred to as the central bank’s preferred measure of price growth.
Core inflation, according to PCE, was 4.6 per cent in May. In April, PCE inflation was 4.4 per cent on an annual basis, and core inflation was 4.7 per cent.
Immediately after opening, Apple rose over one percent and thus passed a market value of 3,000 billion dollars. According to CNBC, Apple became the first company to pass the limit in January, but was unable to sustain the rise until closing time. On Friday, the tech giant will therefore have a new opportunity.
The stock must close at a closing price of $190.73 or higher to stay above $3,000 billion.
More interest rate hikes?
In contrast to the consumer price index (cpi), the weighting of goods and services in the PCE is adjusted to take into account changes in the people’s consumption habits. The PCE deflator is the quantity that the US central bank uses as a basis in its calculations of inflation trends, and is therefore the Fed’s preferred measure of price growth.
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Last week, Jerome Powell and the monetary policy committee decided to keep the key interest rate steady, but the overview “dot plots” released the same evening gave clear signals that the interest rate will continue to rise.
Dot plots tell what the members of the Fed’s interest rate committee think about the level of interest rates going forward. Ahead of the meeting, it was expected that this overview would point in the direction of one simple interest rate hike for this year.
The bottom line is that the Fed’s interest rate committee envisages two more interest rate hikes this year.
At the previous dot plot – in March – the members of the Fed’s interest rate committee believed on average an interest rate level of 5.1 per cent at the end of 2023. This was recently revised upwards to 5.6 per cent.
Pike action
On Wednesday this week, a bunch of heavyweights gathered for a panel debate, when ECB chief Christine Lagarde, Federal Reserve chief Jerome Powell, BOE chief Andrew Bailey and Japan’s central bank governor Kazuo Ueda took their place on stage.
Lagarde repeated the message that another interest rate hike is very likely at the next meeting in July, while Bailey admitted that inflation has remained uncomfortably high due to less labor force after the pandemic.
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Powell estimated that he and the Federal Reserve interest rate committee envision at least two more interest rate hikes.
– We think there is more tightening to come. The driver is a very stretched labor market. I do not want to rule out the possibility of several interest rate hikes in a row, he stated.
All three warned that further interest rate hikes may be necessary to bring down inflation.
Powell went on to say that the US economy has shown strength despite many expecting a recession in the coming months.
According to Powell, there is still an opportunity to avoid very high unemployment, which has previously been the consequence when interest rates have been raised. The reason for this is that there is still a need for labour.
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Regarding a possible recession scenario, Powell said he does not see it as the most likely outcome, but still emphasized that it is a possibility for it to occur. He went on to pour cold water down the backs of those who hoped for a quick normalization of the high price increase.
Powell does not expect core inflation in the US to fall to two per cent either this year or next year, but expects it to happen in 2025 first.
– We will be restrictive as long as necessary, he said. (Terms) Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using links, which lead directly to our pages. Copying or other forms of use of all or part of the content may only take place with written permission or as permitted by law. For further terms see here.
2023-06-30 12:56:15
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