MNI US Macro Weekly: Warsh Faces A Tough Start

Download Full Report Here: https://media.marketnews.com/US_macro_weekly_260515_86a449a208.pdf Executive Summary * Inflation was the dominant macro undercurrent this week, with a slew of data, and most FOMC participant commentary expressing concern that a once-delicate dual mandate balancing act is turning more decisively to an inflation-fighting battle as the war in the Middle East simmers. * April CPI was slightly higher than expected, but PPI was even stronger, and import prices saw a far greater than expected uptick. While energy was of course a big part of the story, as was a housing quirk that temporarily drove up CPI last month, underlying data suggest burgeoning price pressures more broadly. * Core PCE tracking appears relatively steady in April versus March, closer to 0.30% M/M after PPI, though that's unlikely to allay the FOMC's growing concerns. * Activity data stayed solid: GDPNow was revised up to 4.0% Q/Q SAAR for Q2, while retail sales held up in April (with the caveat that they look less positive in real terms). And manufacturing continues to look robust. * The limited labor market data we saw this week continued to represent low-hire, low-fire conditions, with claims consistent with stabilization in 2026 so far, keeping the Fed's focus increasingly on inflation. * Against this backdrop, Kevin Warsh was confirmed by the Senate as the next Fed Chair, and he should be sworn into the office imminently. While he's considered a champion of lower rates due to the assumption that such a stance was a prerequisite to being nominated by the Trump administration, his recent public commentary hasn't been particularly telling on that front. * In any case the macro backdrop means he inherits a poisoned chalice from outgoing Chair Powell, with a divided Committee that looks increasingly agnostic on whether the next move is a hike or a cut. * Indeed, Fed hike pricing moved firmer over the week: after hovering around 2bp of cumulative hikes by end-2026, implied tightening looked set to close the week at around 15bp for the year - not quite a full rate hike implied but about half an additional hike added just this week, with a range of factors impacting. * Our Policy Team's latest piece on the matter ("MNI POLICY: Warsh Faces Resistance On Inflation, Productivity") notes Warsh will need to do some heavy lifting to convince FOMC colleagues of two key pillars of the views he has expressed over the past year - that policymakers can look through supply shocks and that productivity gains will bolster the central bank's ability to lower rates. * Next week, US data flow takes a breather after Inflation Week; key events are regional Fed surveys, flash US PMIs, jobless claims for the May payroll reference period, housing data, and especially FOMC Minutes on Wednesday, with focus on whether the Committee is moving toward a more two-sided outlook on rates.

MNI Asia Pac Weekly Macro Wrap:

A weekly wrap of some of the key macro themes/data outcomes for the Asia Pac region.

MNI US Inflation Insight: Energy And Services Pack A Punch

Download Full Report Here: https://media.marketnews.com/US_Inflation_Insight_May2026_7914be7693.pdf EXECUTIVE SUMMARY Soaring energy prices amid the conflict in the Middle East continued to punctuate the overall strength in inflation in April. Consumer price inflation was slightly hotter than expected, with some unexpected softness in core goods offset by strong services dynamics - but headline producer price inflation was scorching (less so on core). Overall, sequential core PCE looks to have been relatively steady in April vs March and won't allay the FOMC's growing concerns that the dual mandate balancing act is turning decisively to an inflation-fighting battle. * The sequential pickup in core CPI % M/M in April (to 0.38% vs 0.36% consensus from 0.20% in March) was largely driven by services, while headline registered 0.64% M/M (vs 0.56% consensus, 0.87% prior), driven by a continued surge in energy and a pickup in food prices. * The pickup in services was primarily due to the doubling of housing's contribution to core CPI, to 0.23pp from 0.11pp. This was expected given April's methodological quirk that pays back for last October's missing data due to the government shutdown and will reverse next month. * But even outside of that, services printed on the high side: Core services excl OER & primary rents ('supercore'): 0.454% M/M after 0.179% prior, around the middle of a very wide range of expectations. * Conversely, with the exception of apparel, core goods CPI inflation was surprisingly tepid in April, with our estimate of median inflation echoing this. * The main inflation gauges in the April PPI report substantially exceeded expectations, with the details not offering much comfort either. The headline final demand PPI came in at 1.4% M/M, well above the 0.5% consensus and the Y/Y reading at a post-2022 high 6.0% (4.8% expected). Mitigating the impact of the report is that a large portion of the overall rise was in trade services, meaning that the main core aggregate - ex-food/energy/trade services - was closer to the expected mark at 0.6% M/M (consensus 0.3%) though the Y/Y gauge rose to 4.4% (4.2% consensus), the highest since Feb 2023. * Analyst estimates for April core PCE were little changed but mostly lower after the PPI report, with the subcomponents seen as mixed. With expectations for core PCE after the CPI report having centered around 0.31% M/M, they now appear to be closer to 0.30%, similar to March's 0.29%. * The CPI/PPI combo failed to move the needle much on Fed pricing, with futures currently implying 9-10bp of cumulative Fed tightening by year-end, the same as just prior to the CPI release Tuesday. That said, it kept the broader uptrend in place, with expectations briefly at 11bp following the PPI report.

MNI US CPI Preview: More Than Just An Energy Story

Download Full Report Here: https://media.marketnews.com/USCPI_Prev_May2026_ce44dfba74.pdf Executive Summary * Inflation is expected to stay elevated in April, with MNI unrounded consensus pointing to 0.56% M/M for headline CPI (a slight softening vs March) and 0.36% M/M for core CPI (a sequential acceleration), pushing Y/Y inflation higher and further away from the Fed's 2% target. * Unsurprisingly, energy is expected to remain the main driver of headline inflation, as higher oil and gasoline prices tied to the Middle East conflict continue to lift prices, though the April increase is expected to be smaller than March's spike. * But it's not just an energy story. Food prices are expected to pickup (potentially reflecting MidEast conflict supply-chain related issues), and core inflation is also expected to firm, with continued upside pressure from tariffs still seen having an impact. * Important core contributors include airfares and used cars, while softer lodging and apparel prices may offset some of the upward pressure; supply-chain stress and semiconductor shortages are also adding to goods price risks. * Part of the core pickup is attributable to a temporary statistical quirk tied to the 2025 government shutdown, which is likely to cause a one-off jump in housing inflation. That could put a little more focus on supercore (ex-housing services) inflation, for which there is a very wide range of estimates. * The breakdown of the above translates into slightly lower early estimates for April core PCE vs CPI, with a median of 0.26% M/M (range 0.22-0.28%), a relatively steady outturn seen from March's 0.29%. * With recent data suggesting lessened downside risks to the labor market, FOMC officials are likely to increase their focus on inflation. Recent commentary has emphasized upside inflation risks from energy, tariffs, and broader price pressures, making near-term rate cuts look less likely and the market seeing a modest hiking bias in 2027 but ultimately with the Fed on hold for the foreseeable future.