Week ahead: US inflation data could bolster case for Fed rate cut in September

Jerome Powell, chair of the US Federal Reserve

The US Federal Reserve’s preferred measure of inflation is expected to show its coolest monthly reading since late 2023, offering hope that policymakers could start lowering interest rates in September.

Economists forecast the personal consumption expenditures price index for May, due to be published on Friday, to record no monthly change, while the core measure, stripping out food and energy to provide better picture of underlying inflation, is expected to see a 0.1 per cent gain.

Although both the overall and core measures are expected to 2.6 per cent annual advances in both the overall and core measures, the projected rise in core inflation would still be the smallest since March 2021.

Fed officials held interest rates in a range of 5.25 to 5.50 per cent for the seventh straight meeting earlier this month. Policymakers have noted encouraging progress on inflation readings like the consumer price index, but they are still looking for signs of longer term improvement.

Friday’s inflation numbers are due to be published alongside personal spending figures. Other data scheduled for this week include June consumer confidence, May contract signings for purchases of new and previously-owned homes, the third estimate of first-quarter economic growth and durable goods orders for May.

Alongside its latest decision, the Fed released its latest set of ‘dot-plot’ projections, which signalled that policymakers only expect to cut rates once this year, down from three back in March.

Across the pond, London’s corporate diary is dominated by results from FTSE 100 outsourcing giant Bunzl and FTSE 250 electrical retailer Currys.

Analysts at AJ Bell are looking out for any update on acquisitions in Bunzl’s first-half trading update on Thursday.

“Bunzl has traditionally used bolt-on deals to supplement its organic growth and complement its business structure,” they added, with the firm spending £468m on 19 acquisitions last year.

The firm has issued “relatively cautious guidance” for 2024 as sales growth has slowed in recent times, AJ Bell said, although analysts expect total full-year sales to be £11.9bn, compared to £11.8bn in 2023.

Currys is due to published its full-year earnings on Thursday. In April, the firm completed the sale of its Greek arm to domestic power generation and supply giant Public Power Corporation for £175m as part of efforts to strengthen its balance sheet.

Currys was in sharp focus earlier this year when it looked to be at the centre of a bidding battle between Waterstones owner Elliott Advisors and Chinese online shopping giant JD.com, but both walked away from a potential takeover in March.

“Consumers have struggled to justify upgrading appliances, with demand for small electrical goods being particularly affected,” said Guy Lawson-Johns, equity analyst at Hargreaves Lansdown.

“But with the green shoots of a recovery in UK discretionary spending, even a partial return to the longer-term growth trend could significantly benefit the group.”