Investors continue to receive conflicting signals about the likely date of the first interest rate cut in the current US cycle.

On 29 March, the Federal Reserve’s preferred measure of inflation – the PCE (personal consumption expenditures) price index – was up 2.8% on a 12-month basis and 0.3% month-on-month, both as expected.

However, core PCE, also at 0.3% month-on-month, was below the 0.4% forecast, with the 12-month figure at 2.5% in line with estimates.

Nothing too earth-shattering there, but this release was followed by news the US manufacturing sector grew in March for the first time since September 2022 which saw investors reduce their bets on a June rate cut.

The next big pointer to the Fed’s thinking comes in the form of the non-farm payrolls on 5 April – anything above the 205,000 penciled in by forecasters could imply tight labour conditions and further undermine the case for a pivot to lower rates in two months’ time.

This is followed by data on US consumer and producer prices on 10 April and 11 April, respectively. There have been signs recently of producer prices ticking higher and this trend is worth keeping tabs on because so-called factory gate prices tend to feed through into the prices paid by consumers.

The European Central Bank is widely expected to keep interest rates on hold at its meeting on 11 April so attention will fall on the surrounding commentary. 

A member of the central bank’s governing council, Robert Holzmann, has notably observed in the media that the ECB could cut interest rates before the Fed.

‹ Previous2024-04-04Next ›