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ECB vs the Fed

Eurozone inflation for the month of May was published today and it was higher than expected with a 2.6% YoY increase. Core inflation was also higher at 2.9%. More importantly, and despite that fact, the ECB is expected to cut rates by 25 bps next Thursday, perhaps setting the (cutting) tone for other major central banks. Today at 8:30 am, the U.S. will publish the PCE for the month of April, the Fed’s preferred measure of inflation and it is expected to show an increase of 2.7%, in line with the Eurozone, however, the probability of a Fed rate cut in the U.S. is still below 50%, and it’s very unlikely that rates will come down unless inflation trends down towards the 2% target, and from the table below, it’s not clear we’re going in that direction. Next FOMC meeting will take place in 2 weeks, on June 11-12.


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Source: Macrobond (thank you Luis Tegho!)



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