Summary
United States: Few Signs of Tariff Inflation
- This week was all about prices, and thus far, the expected tariff-induced inflation pickup has yet to appear in the hard data. Both consumer and producer price growth came in cooler than expected in May with only hints of tariff-related price pressures in specific categories. It is still the early innings, however, and we expect price growth to accelerate as the year progresses.
- Next week: Retail Sales (Tue.), Industrial Production (Tue.), Housing Starts (Wed.)
International: Market Fixation on Inflation Nation
- This week, we got price and wage data from a variety of advanced and emerging economies. In the United Kingdom, wage growth eased slightly but remains somewhat elevated, and we maintain our outlook for gradual Bank of England easing. Norway’s inflation report was somewhat mixed. In Latin America, Mexico’s inflation ticked up slightly, price growth in Brazil remains elevated but did ease more than expected, and Colombia’s inflation also slowed more than expected.
- Next week: China Industrial Production and Retail Sales (Mon.), Brazil Selic Rate (Wed.), Bank of England Policy Rate (Thu.)
Interest Rate Watch: June Flashlight for the FOMC Blackout Period
- Despite the ongoing tumult around trade policy, the near-term outlook for monetary policy is steady-as-she-goes. We expect the FOMC to leave the federal funds rate unchanged at its meeting next week and signal that monetary policy remains in a holding pattern.
Topic of the Week: The Shifting Immigration Landscape
- A recent pullback in immigrant workers appears to be weighing on labor force growth. Assuming that population growth simmers alongside a slower pace of new foreign-born entrants, the breakeven pace of nonfarm payroll growth would fall from 150K per month to 90K.
