Fed Chair Powell sees resumption of disinflation trend

Fed Chair Powell sees disinflation resuming. US job openings beat forecasts, signaling strong labor demand.

By Ahmed Azzam | @3zzamous | 2 July 2024

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  • Fed Chair Jerome Powell signals disinflation trend resuming

  • US 10-year Treasury yield declines by 4bps to 4.41%

  • Job openings rise by 221,000 in May 2024

  • Annual inflation rate in Euro Area drops to 2.5% in June

Federal Reserve Chair Jerome Powell noted that prices are indicating a resumption of the disinflation trend. This observation comes just days before the US payrolls report, which is anticipated to reveal further softening in labor conditions. While such data might bolster Wall Street's expectations for rate cuts, equity investors are cautiously hoping the report doesn't cool excessively, as this could heighten concerns about economic risks amid inflation exceeding the Fed’s 2% target. On Tuesday, the yield on the US 10-year Treasury note dipped by about 4 basis points to 4.41%.

Chicago Fed President Austan Goolsbee emphasized that the Fed should automatically reduce interest rates if inflation continues its downward trajectory towards the target. "We are on a path to 2%," Goolsbee told Bloomberg TV.

US job openings surpass expectations

The number of job openings in the US increased by 221,000 from the previous month, totaling 8.140 million in May 2024. This figure surpassed the market consensus of 7.91 million, indicating a robust demand for labor despite broader economic uncertainties.

Euro Area inflation rate eases to 2.5%

Preliminary estimates revealed that the annual inflation rate in the Euro Area decreased to 2.5% in June, down from 2.6% in May, aligning with market forecasts. However, the core Consumer Price Index (CPI) remained steady at 2.9%, slightly higher than the expected 2.8%. Despite this, European Central Bank (ECB) Chief Economist Philip Lane warned that there isn't yet convincing evidence that inflation threats have passed, suggesting that policymakers may pause on lowering borrowing costs this month.

Eurozone unemployment rate holds steady at 6.4%

The unemployment rate in the Euro Area remained at a historic low of 6.4% in May 2024, unchanged from April and in line with market expectations. Spain continued to face the highest unemployment rate at 11.7%, followed by France at 7.4% and Italy at 6.8%. In contrast, Germany reported the lowest rate at 3.3%. A year ago, the jobless rate was marginally higher at 6.5%.