April’s Personal Consumption Expenditures (CPE) report came in line with analyst expectations as investors await the Federal Reserve’s next finance charge rate decision. HSBC U.S. Economist Ryan Wang joins Morning Brief to discuss the possibility of rate cuts this year.
With core inflation staying at 2.8% year-over-year, Wang notes that the latest CPE print “doesn’t indicate much progress on disinflation this year.” He adds that consumer spending has largely remained resilient, however, development over the last month has been limited as April retail sales came in lower than expected.
Wang believes that core PCE needs to fall to about 2.5% before the Fed delivers a rate cut, explaining, “On our forecast, we see that as a very, very close call.” He expects a single cut in September, but without core CPE decreasing further, the Fed may not deliver a sequence of rate cuts. Wang reiterates, “We expect just that one rate cut this year, followed by an additional 75 basis points of rate cuts in 2025.”
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