Inflation Spike And Jobs Report To Be Discussed At Fed Meeting

(CTN News) – A few months ago, it appeared that the Federal Reserve Inflation would cut rates to their highest levels since the 1980s at their May meeting.

Despite this, no talk of a rate cut is on the agenda as the Fed gathers in Washington beginning on Tuesday.

Consumer spending that just won’t quit, higher inflation readings and a humming labor market have thrown off the Fed’s script.

Wells Fargo’s corporate and investment banking group managing director and senior director Sam Bullard said the FOMC has little reason to ease policy in the near term due to stubborn inflation and resilient economic activity. “Fed officials have noted the string of hot inflation prints shows progress on inflation has stalled and the Fed needs to ‘recalibrate.'”

Following the earnings reports from some of the top technology stocks, such as Microsoft and Alphabet, stocks ended the week on a high note. As a result, Thursday’s report that GDP grew by 1.6% in the first quarter after jumping 3.4% in the fourth quarter took some of the sting out.

Net exports and government spending accounted for most of the soft GDP number, BCA Research reported on Friday. A quarter-on-quarter look at government spending showed an annualized growth rate of 1.2%, the lowest since 2022.”

At the same time, net exports detracted 0.86 percentage points from GDP growth. Also, private inventories contributed negatively to growth, subtracting 0.35 percentage points.”

Despite a key inflation measure rising by 3.7% in the quarter, BCA still expects inflation to moderate in the months ahead.

As the economy heads into recession later this year or in early 2025, our strategists expect consumer spending to decline and the labor market to deteriorate as the economy continues to deflation.

Though a rate cut is unlikely this week, the Fed meeting and press conference afterward on Wednesday may still provide clues about the central bank’s outlook for inflation and the economy going forward. In addition, the Fed may report on the progress it has made in reducing its COVID-19 pandemic-related securities holdings.

In addition to the home price index, the S&P Corelogic index for February will provide plenty of economic data points. Although dated, it may indicate whether housing inflation has declined in 2024, one of the key components of the consumer price index.

Tuesday will also see the release of a Conference Board survey of consumer confidence. Though sentiment is expected to slow from March’s dip, the trend has been for it to remain mostly flat.

ADP’s monthly survey of employers for April kicks off a variety of labor market reports Wednesday. Despite the slightly lower gain than March, it will still be consistent with a growing job market, according to forecasts.

On Wednesday, the Labor Department will release its report on March’s job openings. As expected, the number will be lower than February’s 8,7 million, but still around that level.

Friday brings the Labor Department’s April jobs report. The economists expect a slowdown from March’s unexpected 303,000 increase, but still around 250,000, a solid showing.

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