The Fed cuts interest rates in July? US PPI in April lower than expected, and the job market cools down!
PPI and CPI are showing deflationary signals. The number of initial jobless claims in the United States rose to the highest level since 2021 last week, indicating that the labor market is cooling down. The Fed rate swap increases the forecast for interest rate cuts starting in July.
Thursday, the US released PPI and initial jobless claims data.
US April PPI MoM was 0.2%, lower than expected 0.3%, and previous value -0.5%.
US initial jobless claims for the week ending May 6th were 264,000, higher than expected 245,000, and previous value 242,000.
PPI lower than expected
Yesterday's CPI cooled slightly, and the market expected the producer price index (PPI) to rise month-on-month (last month was a decline), but the year-on-year growth rate will further slow down.
After a 0.5% MoM decline in March, April PPI rose 0.2% MoM (lower than expected 0.3%), which slowed the YoY growth rate to 2.3% (previous value 2.7%, expected 2.5%).
Core PPI YoY also slowed down. The trend of PPI and CPI now shows deflationary signals.
Finally, among all the "price stability" indicators that track the sharp drop in M2, PPI seems to be in a leading position. All of these give the Fed more room to pause rate hikes (or cut rates).
Labor market cools down
The Fed's interest rate swap increased the forecast for rate cuts starting in July.