Eyes On US Q1 2024 GDP Data, Australian CPI Inflation Rises Unexpectedly In April

It’s all about the US economy this week as markets will have the chance to scrutinise GDP data while the debate over interest rates and the possibility of a cut continues with policymakers giving mixed signals.

In Australia, an elevated CPI inflation figure in April raised questions over the future of the Reserve Bank of Australia (RBA) monetary policy adjustments.

US GDP Q1 2024 Preliminary Report

On Thursday, economists will be able to learn more about the state of the US economy from a preliminary Q1 2024 GDP report set to be published by the US Bureau of Economic Analysis (BEA).  

Some economists forecast that the country’s economy grew by 3.1% in the first quarter of the year. US real GDP growth is expected to come in at 1.3% (annualized). 

An EY report, commenting on data that was released in April, said: “As we move into Q2, we believe the economy will gently cool as slower labor demand, easing wage growth, stubborn inflation and tight credit conditions constrain private sector activity. And we stress that if inflation proves to be stickier than anticipated, the downside risk to the economy from reduced real income growth, a ‘higher for longer’ Fed stance and tightening financial conditions could be notable. Overall, we anticipate real GDP growth will average 2.4% in 2024, constrained by a slower start to the year, and we continue to expect growth will cool to 1.7% in 2025.”

Fed’s Kashkari Suggests More Inflation Progress May Be Needed

Minneapolis Federal Reserve President Neel Kashkari told CNBC reporters that the Fed should wait to have a clearer view of an inflation downtrend before lowering borrowing costs.

“Many more months of positive inflation data, I think, to give me confidence that it’s appropriate to dial back. I’m not seeing the need to hurry and do rate cuts. I think we should take our time and get it right,” Kashkari noted.

Kashkari, one of the most vocal Fed policymakers, didn’t hesitate to suggest that even raising interest rates is an option that could be taken into consideration if economic conditions in the UK require so. 

It should be noted that CPI inflation in the US came in at 3.4% in April, on an annualised basis, while the Fed’s target is a reading of 2%.

Australian Monthly CPI Rises Unexpectedly

According to a report by the Australian Bureau of Statistics (ABS), monthly CPI inflation rose by 3.6% in April, on a yearly basis. The figure exceeded analysts’ expectations, who had forecast a 3.4% reading. Despite the surprising rise, economists at ABS noted that inflation had been relatively stable over the past five months.

Saxo Bank’s analysts speaking to The Guardian reporters suggested that “this could continue to give reason to the RBA to postpone rate cuts but is unlikely to bring rate hikes back on the table given the loosening Australian labour market and stretched consumer.”

Fed Beige Book To Be Published On Wednesday

The Fed is going to publish its Beige Book later today. Data included in the Beige Book could shed more light on the US economy condition and help economists forecast the future of the Fed’s monetary policy.

The Fed Beige Book is a report published eight times a year by the Federal Reserve. It provides a summary of current economic conditions across the 12 Federal Reserve Districts. The report includes anecdotal information on various sectors like manufacturing, agriculture, and consumer spending, helping policymakers assess economic trends and inform decisions on monetary policy.

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