At the same time, price growth came in higher than expected for the quarter. Bad news for interest rate cuts here at home, according to the chief economist.
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The US economy grew less than expected in the first quarter, coming in at 1.6 percent. In advance, 2.5 percent was expected, according to Bloomberg. In the previous quarter, growth was 3.4 per cent.
The share indices in the US fall significantly in pre-trade. The S&P 500 is down around 1.1 percent. The Nasdaq falls 1.5 percent and the Dow Jones 1.1 percent.
Together with the growth figures, the report shows inflation of 3.4 per cent for the quarter. Well above the previous quarter’s 1.8 per cent.
Chief economist at Handelsbanken Marius Gonsholt Hov pays particular attention to the price signals.
– This is bad news considering the timing of interest rate cuts both in the US and here at home. The most important thing here is not mainly that growth is weaker, but that the price signals were so strong, he says.
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Expectations about cuts are shifting
The market follows macro figures from the US with a magnifying glass, looking for signals for when the first interest rate cut may come. In recent times, expectations have been pushed further back in time, after figures for price growth and the labor market have come in stronger than expected.
according to the CME FedWatch Tool, the probability of an unchanged interest rate in June is 88 percent.
Tomorrow comes The PCE inflation numbers The PCE inflation figuresCPI inflation and PCE inflation both measure price changes for consumers. However, PEC inflation is broader in scope and takes into account price changes throughout the output of the economy, as well as changes in costs to consumers. for March.
Hov in Handelsbanken says that there will be a clear upside risk in the figures coming tomorrow.
– It was expected that tomorrow’s PCE figures would show a nicer development, but with these figures we received today, it may indicate that the development there has also been stronger than expected, says the chief economist.
Therefore, interest rate expectations are now rising quite sharply, says Hov.
– If you look at the two-year bond, which is Fed-sensitive, for example, it has risen significantly following the figures. It is solely because of the inflation figures in GDP today.
The US central bank, the Federal Reserve (Fed), has raised the interest rate in order to reduce price inflation towards the target of around two per cent. The forecasts from the Fed members at the last interest rate meeting indicated that there could be three interest rate cuts this year.
Hov adds that it may now begin to indicate that you will have to wait until November before there is possibly an interest rate cut from the Fed.
– Expectations have constantly been pushed beyond the autumn, and today’s figures underline the risk.
