Daily Flows & Insights – Disinflation in the U.S. Gradually on Its Way & The Week Ahead

Daily Flows

  • This month marks the final period for the repayment of the Term Funding Facility to the RBA from domestic banks.
  • This will see approximately $85 billion of cheap funding leave the banking sector, which may, in turn, contribute to tightened liquidity conditions as banks need to replace this funding.
  • Investors with funds to place should be on the lookout for bespoke opportunities as banks may offer higher levels to meet liquidity standards.

Disinflation in the U.S. Gradually on Its Way

  • The US core PCE price index increased by 0.2% in April 2024, the slowest rise in 2024, and below market expectations of 0.3%.
  • Annual PCE inflation remained at 2.7% in April 2024, matching a 4-month high reached in March. The core PCE annual rate was 2.8% in April 2024, the lowest since March 2021.
  • The print did not move markets significantly, indicating a trend towards moderating inflation, aligning with the Federal Reserve’s forecast of 2.4% by the end of 2024.

The Week Ahead

  • On the domestic front, highlights include company gross profits, Q1 GDP, and the Balance of Trade.
  • Analysing the details of the GDP print will be crucial, especially discerning GDP per capita vs. aggregate GDP to understand how population growth is affecting inflationary pressures.
  • In the U.S., the week starts with PMI manufacturing data. Last month’s figure was 49.4, and markets are forecasting a rise above 50 for this month.
  • As always, the JOLTS print will be watched closely by markets as the Fed looks for a cooling in the labor market to ease inflationary pressures. The week concludes with U.S. PMI services and Non-Farm Payrolls.
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Curve Team
Jack Pedersen