The US Dollar Index remained weak at 104.49, ending the week with a decline. Gold initially dropped and then rebounded to close at $2414, reaching as high as $2419 before the weekend. Bitcoin bulls exploded, successfully reaching $67,000.
The US Consumer Price Index (CPI) inflation slowdown intensified rate cut pricing, but several hawkish officials voiced support for the dollar ahead of next week’s Federal Reserve minutes.
In the Middle East, Israeli fighter jets made a rare "lethal attack" on the West Bank, spurring safe-haven sentiments.
US April CPI Inflation Slows, Rate Cut Pricing Intensifies
The US Bureau of Labor Statistics reported on Wednesday that, after seasonal adjustments, the US April CPI rose by 3.4% year-on-year, in line with expectations. The March CPI year-on-year increase was 3.5%.
The US April CPI rose by 0.3% month-on-month, below the expected 0.4%, following a 0.4% increase in March, marking the first decline in six months for US CPI growth.
Excluding food and energy, the US April core CPI rose by 3.6% year-on-year and 0.3% month-on-month, both in line with expectations.
US retail sales data also underperformed, with April retail sales flat month-on-month, below the expected growth of 0.4%.
Following the release of April CPI data, the market expects the Federal Reserve to accelerate rate cuts this year.
Wall Street magnate, economist, and global strategist Peter Schiff stated, "All economic and other data indicate that the CPI will rise significantly in the future. If the Federal Reserve needs a false excuse to cut rates, investors hope this fits the bill."
Additionally, US April Producer Price Index (PPI) data exceeded expectations. The Bureau of Labor Statistics reported that April PPI rose by 2.2% year-on-year. Annual core PPI and monthly core PPI both rose by 2.4% and 0.5%, respectively, consistent with March data. Both April PPI and core PPI rose by 0.5% month-on-month.
Fed "Hawks" Emerge but Hint at Possible Rate Cut by Year-End
This week, Cleveland Fed President Loretta Mester, New York Fed President John Williams, and Richmond Fed President Thomas Barkin all indicated on Thursday that inflation might take longer to reach the 2% target.
Mester stated, "Upcoming economic information suggests that gaining this confidence will take longer, and it is prudent to maintain our restrictive stance for a longer period as our understanding of the inflation path becomes clearer."
Williams made similar remarks on Thursday, saying he saw no reason to adjust monetary policy now. He mentioned, "I do not expect to gain greater confidence in moving towards the 2% inflation target in the short term."
Barkin noted that demand needs to cool further to bring inflation to the Fed’s target. He highlighted that as supply chains recover, goods inflation has significantly decreased. He said, "To sustainably reach 2% in the right way, I think it will take some time."
Atlanta Fed President Raphael Bostic hinted at the possibility of a rate cut by the end of 2024 but warned of the need for patience with rates. He said, "I am pleased with the progress on April inflation, but the Fed has not yet achieved its goal."
He continued, "The Fed must remain patient and vigilant, as there is still significant price pressure in the economy. I hear from businesses that their pricing power is limited and cannot fully pass on input costs. Businesses cannot achieve 100% price transmission, and the economy is slowing down."
"Lowering rates before the end of the year might be appropriate. My current outlook is for inflation to continue to decline, which would suit a rate cut later this year, but nothing is locked in.
I expect inflation to slow gradually, with economic momentum continuing. I must be open to a wide range of possibilities, as many different scenarios can play out."
He further commented, "The US economy remains quite resilient and strong, and I do not foresee a recession."
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Huang Bo
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