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Weekly Market Preview
Friday, May 10, 2024
Investors expect a set of important of economic data this week, with particular attention on the US Consumer Price Index report for April. The recent increase in inflation levels, contrary to the Federal Reserve’s intended direction, has prompted a reassessment of market expectations regarding interest rate cuts in this year. This re-evaluation occurred notably after Federal Reserve members made explicit statements indicating a lack of urgency in reducing rates and they stressed the importance of waiting for approximately two months’ worth of data confirming a sustained decline in inflation levels before contemplating any adjustments to the existing monetary policy.
According to Bloomberg, projections suggest that inflation levels may decrease from 3.5% in March to 3.4% in April, while the YoY core consumer price index may drop from 3.8% to 3.6%. Any higher-than-expected data is likely to bolster the case of higher for longer interest rates, and vice versa. It’s noteworthy that inflation stemming from the services sector, as well as housing rents, is considered significant in preventing an overall decline in inflation levels. Conversely, recent indications suggest that inflation levels may eventually decrease, as seen in the weakening of the US labor market, as indicated in the US jobs report for April.
Moreover, market participants will closely scrutinize speeches by the Chairman and members of the Federal Reserve Board scheduled for this week to gain further insight into the forthcoming monetary policy, especially considering recent labor market data releases.
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