Fed Governor Philip Jefferson issued a cautious message in a speech last night, stating that while April’s inflation data was “encouraging,” it remains “too early to tell” if the recent slowdown in disinflation will be “long lasting.” He described current monetary policy as restrictive and declined to predict whether rate cuts will happen this year. He emphasized the importance of continuing to closely monitor incoming economic data, the outlook, and the balance of risks.
Separately, Cleveland Fed President Loretta Mester told Bloomberg Television that she is reconsidering her earlier forecast of three interest rate cuts this year. Although not her “base case,” Mester noted that if progress on reducing inflation stalls or reverses, Fed is “well positioned” to increase rates if necessary.
San Francisco Fed President Mary Daly also shared her views, expressing doubt about achieving the 2% inflation target in the near term. Daly highlighted that while there are expectations for improvement in shelter inflation, the progress is not expected to be rapid.
Australian Westpac consumer sentiment falls -0.3% mom amid budget disappointment
Australia Westpac Consumer Sentiment index fell by -0.3% mom to 82.2 in May. Westpac highlighted that the primary takeaways from the May survey are “no let-up in the weak consumer environment” and the cautious mindset of consumers. Consumers are more inclined to use funds from fiscal measures to repair their finances rather than go on spending sprees, which aligns with RBA’s efforts to bring inflation back to target.
The May survey, conducted during budget week, provided a clear comparison of sentiment before and after the budget announcement. Sentiment among those surveyed before the budget was relatively optimistic, with an index reading of 86.8, marking a 5.3% increase from April. However, sentiment plummeted to 76.6 after the budget announcement, reflecting a 7% decline from April. This -11.8% drop in sentiment post-budget contrasts with a -7.4% decline observed last year.
Full Australia Westpac consumer sentiment release here.