Waller, the Fed's "big star", said the April CPI data were gratifying.HilltopbingoBut in the absence of a significant weakening in the labour market, we need to see better inflation data for another three to five months before we consider cutting interest rates at the end of the year. This may require the core PCE month-on-month average to fall to zero in the coming months.HilltopbingoLess than 25%.
Announced on Thursday, May 23HilltopbingoThe number of people applying for unemployment benefits in the week of May 18 was 21.Hilltopbingo.50, 000, lower than market expectations of 220000 and the previous figure of 223000, and from non-quarterly data, the number of people applying for unemployment benefits is still at a historically low level, indicating that the labor market as a whole remains strong and resilient, marginally easing market concerns about employment and economic weakness. The number of weekly jobless claims was 1.794 million, slightly higher than the market expectation of 1.793 million and the previous figure of 1.786 million. From non-quarterly data, the number of continuing jobless claims is still at the low level of the past decade as a whole. Overall, the number of initial jobless claims rose significantly in the week of May 4 due to some special reasons, and then fell for two consecutive weeks on May 11 and 18, which has basically fallen back to the level before the rise, and the non-quarterly data are also at an all-time low, indicating that the US labor market remains resilient.
The May Markit manufacturing and services PMI (initial values) were also released on Thursday, May 23, both higher than market expectations. In May, Markit's manufacturing PMI (initial value) rose to 50.9, higher than market expectations of 49.9 and previous values of 50.0, while services PMI (initial values) rose to 54.8, significantly higher than market expectations of 51.2 and 51.3, the highest since June 2023. On the whole, both ISM manufacturing PMI and Markit manufacturing PMI are picking up, which is also in line with our judgment on the weak recovery of overseas manufacturing cycles. The sharp higher-than-expected PMI in Markit services may more reflect the enhanced wealth effect brought about by the recent stock market rally, further increasing the willingness of residents to consume (especially service consumption), which is in line with our judgment on the resilience of the US economy.
In the minutes of the Fed's May meeting, the comments on the economy, employment and inflation are generally in line with recent remarks by Fed officials, with the biggest incremental message being the Fed officials' doubts about the extent to which monetary policy is restrictive. Although some Fed officials have questioned the limitation of monetary policy recently, the word "many" (many) is still used in the minutes of the meeting, which is still more than the number expected by the market. "although monetary policy is regarded as restrictive, many participants expressed uncertainty about the degree of restriction", which extended to a number of various participants who said that they would support another rate hike if there were upward risks to inflation. Slightly more hawkish than the market expected as a whole.
The speech by Fed officials in the week of May 24 basically continued the recent tone. The biggest bright spot was the clarity of the Fed's "celebrity" Waller on the terms of the rate cut. Waller said that the April CPI data was gratifying, but in the absence of significant weakness in the labor market, it would take another three to five months of better inflation data to consider cutting interest rates at the end of the year. At the July meeting, the Fed will also see two CPI data (May and June) and three PCE data (April, May and June). At the September meeting, the Fed will see four CPI data (May, June, July) and four PCE data (April, May, June and July), so for Waller, the time window for the first rate cut is in September, which may require the core PCE month-on-month average to fall below 0.25% or even around 0.20% in the coming months, but if the core PCE ratio exceeds 0.30% in any one month. It may mean that there is no hope of cutting interest rates in September. Overall, Waller is a partial hawk among Fed officials, so his expectations of interest rate cuts may also represent the expectations of some partial hawk officials.
The author: Guo Xinyu, Huang Runan, Source: Guojun Macro Research, original title: "[Guojun Macro] Federal Reserve" Big Red "Waller interest rate cut threshold-Guotai Junan overseas Macro Weekly