US Growth Slows While Inflation Holds Firm
The US economy grew at a slower pace in the first quarter while price pressures held firm, further complicating the outlook for central banks.
Persistent inflation in March put another dent in the case for rate cuts by the Federal Reserve. The US consumer price index was up 3.5% from a year ago, picking up steam after a 3.2% increase in February, according to data published on Wednesday. Core inflation held at 3.8% amid higher transportation and housing costs. Wholesale prices—considered a gauge of future consumer inflation—gained 2.1%, compared with 1.6% a month earlier. Meanwhile, the March jobs report last Friday revealed an upbeat picture of the labor market. Employment grew by 303,000 jobs, although wage growth eased to 4.1%, the smallest increase since June 2021.
The latest round of economic indicators stoked worries among market participants that a cautious Fed may cut rates fewer times than it previously signaled. While the Fed’s March economic projections forecast three rate cuts in 2024, interest rate futures this week were pricing in the possibility of one or two cuts at most. “The outlook ahead is uncertain,” New York Fed President John Williams said in a Thursday speech, adding that policymakers should take a data-dependent approach. The relative lack of progress on the inflation front this year has underscored the challenges facing the Fed as it balances stubborn price pressures, resilient economic activity, steady hiring trends, and potential risks that could develop in the current environment. In an interview with CNBC, PGIM CEO David Hunt discussed the global economy, higher-for-longer rates, and the outlook for fixed income.
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