Investors have closely followed the personal consumption expenditure deflator as the preferred inflation indicator since it was announced by the Federal Reserve.
And for good reason: it is wider than the consumer price index, which is supposed to better reflect inflationary pressures on the entire economy. May's figures were expected to be steady because in April, the core PCE (without energy and food prices) increased by 2.8% year-on-year. The possibility of several rate cuts that the markets are still hoping for would be supported by 0%.
On the other hand, a rebound would highlight the difficulty of containing price growth and validate the scenario of a single drop in key rates in 2024, which was highlighted at the last monetary policy meeting. The 2.6% inflation figure in May indicates a less significant but gradual inflation pattern, which ultimately lacks visibility for investors.
While we don't see multiple policy rate cuts in 2024, we believe that the country is still on a reasonable growth path and has the necessary assets to stay on track (see Focus). Across all of our fund portfolios, we maintain our investment in it.