EXPLAINER-Charting the Fed's economic data flow

BY Reuters | ECONOMIC | 06/12/24 08:51 AM EDT

(Updates with release of CPI report)

June 12 (Reuters) -

The U.S.

Federal Reserve

is expected to hold its benchmark overnight interest rate steady in the 5.25%-5.50% range at the conclusion of its latest two-day policy meeting on Wednesday.

Policymakers remain uncertain about the timing of a first rate cut and say they want to see more data confirming that inflation will fall, even if slowly.

Among the key statistics they are watching:

INFLATION (CPI released June 12; next release PCE June 28):

Consumer prices were flat in April, the first unchanged month in nearly two years and a further respite from a surprise jump in prices earlier this year. The headline consumer price index rose at a 3.3% annual pace versus 3.4% in March, while the rate was 3.4% in April after excluding food and energy compared to 3.6% "core" inflation in the prior month.

The lower-than-expected inflation for the month could begin rebuilding confidence among Fed officials that price pressures are easing.

The separate personal consumption expenditures price index had risen 2.7% in April, matching the rise in March. Core prices, stripped of volatile food and energy costs, rose 2.8%, also the same as the month before.

The Fed uses the PCE index to set its inflation target, and the April report kept alive the concern mentioned by some policymakers that inflation may get lodged at a rate too far above target to ignore.

But there was some glimmer of progress. The core PCE index rose 0.2% on a month-to-month basis in April versus 0.3% in the prior month, beating analysts' expectations. There were also signs of slowing demand, with real spending and real disposable personal income both dropping slightly, a possible precursor to a further easing of price pressures.

EMPLOYMENT (Released June 7; next release July 5):

U.S. firms added a higher-than-expected 272,000 jobs in May, a solid beat over what economists expected that will likely add to sentiment among Fed officials that there is no rush to cut interest rates given the strength of hiring.

The unemployment rate rose slightly to 4%, the highest level in more than two years. Average job growth in recent months remains above 240,000.

Fed officials have become more comfortable with the idea that continued strong job growth could still allow inflation to fall, especially if the supply of labor keeps growing and wage growth eases.

Neither happened in May. The number of people in a job or looking for work fell, while average hourly wages rose 4.1% compared to a year ago. The Fed generally considers wage growth in the range of 3.0%-3.5% as consistent with its 2% inflation target.

JOB OPENINGS (Released June 4; next release July 2):

In a sign of the job market's continued return to normal, the level of job openings declined again in April and pushed the number of open jobs available for each unemployed person down to 1.24, the lowest level since June of 2021. It is now effectively back to where it was in the years before the COVID-19 pandemic.

Fed Chair Jerome Powell has kept a close eye on the U.S. Labor Department's Job Openings and Labor Turnover Survey (JOLTS) for information on the imbalance between labor supply and demand, and the pandemic-era jump to more than 2 to 1 in the number of open jobs for each available worker was emblematic of the time.

Things have cooled substantially. Other aspects of the survey, like the quits rate, also have edged back to pre-pandemic levels in what Fed officials view as a balance between supply and demand emerging in the labor market overall.

RETAIL SALES (Released May 15; next release June 18):

Consumer spending flatlined in April, and downward revisions to earlier data pointed to the sort of slowing demand Fed officials have said may be needed to finish their inflation fight.

The unchanged retail sales reading for April was reported after unexpectedly strong spending led Fed officials to counsel patience before any rate cuts, and argue that the full impact of prior rate hikes had not yet had its full effect on the economy.

(Reporting by U.S. economics and Fed team; Editing by Andrea Ricci and Paul Simao)

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