The Federal Reserve’s preferred inflation data, the PCE Index, was the highlight of this week. These were followed up loosely by trade balance, retail inventories, and GDP — all of which are strong secondary indicators for current inflation.

For lending partners and those affiliated with broader markets, inflation is the key determining factor for rate adjustments, and other data at this point has a nominal impact in comparison. It does appear the Federal Reserve wants to have a strong hand towards inflation and will be careful about cutting rates even this year. 

The broader market is holding such expectations as well. As a side note, the Federal Reserve’s Beige Book still shows signs that the economy is going strong, but businesses are showing reservations about the current interest rates.

PCE Index

April PCE shows the smallest increase in ‘core’ inflation this year. Prices in the U.S. rose again in April, the Federal Reserve’s preferred PCE index found, but a recent surge in inflation in early 2024 may have also shown signs of fading. The PCE index rose 0.3% last month, the government said Friday. Economists polled by The Wall Street Journal had forecast a 0.3% gain.

Federal Reserve’s Beige Book

A Federal Reserve survey found that the U.S. economy expanded in the late spring, but persistent inflation, high interest rates, and political uncertainty caused businesses to turn “somewhat more pessimistic.” The latest findings in the Beige Book suggest the economy is unlikely to speed up until inflation slows further and the Fed can cut high U.S. interest rates.

GDP

The U.S. economy grew at a lackluster 1.3% annual pace in the first three months of the year, revised figures show, largely because of softer consumer spending that could herald a broader slowdown in the economy. The increase in gross domestic product, the official scorecard for the economy, was the smallest in almost two years. Previously the government reported that GDP had expanded at a 1.6% rate in the first quarter.

Consumer Confidence

The U.S. index of consumer confidence rebounded to 102 in May from a revised 97.5 in the prior month, the Conference Board said Tuesday. This is the first increase in the index after three straight monthly declines.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates are seeing an increase by 0.12% with the current rate at 6.36%
• 30-Yr FRM rates are seeing an increase by 0.09% with the current rate at 7.03%

MND Rate Index

• 30-Yr FHA rates are seeing an increase by 0.05% for this week. Current rates at 6.75%
• 30-Yr VA rates are seeing an increase by 0.05% for this week. Current rates at 6.77%

Jobless Claims

Initial Claims were reported to be 219,000 compared to the expected claims of 218,000. The prior week landed at 216,000.

What’s Ahead

We should expect several interim reports; and while they do not impact inflation data the most, they are still relevant. The top reports will come from Non-farm payrolls and unemployment numbers. The more minor reports will be shown in the manufacturing data with PMI and ISM numbers. The next CPI and PPI release is the week after that, which also has the largest impact on rate decisions, even if the Federal Reserve would like to use the PCE Index as their preferred data.