The Federal Reserve appears cautiously optimistic as tariffs imposed under President Donald Trump’s administration have yet to significantly push up official inflation measures. However, policymakers remain committed to keeping interest rates on hold until the full effects of U.S. trade policies become clearer.
Data expected Friday are forecast to show that the U.S. personal consumption expenditures (PCE) price index—excluding volatile food and energy costs, and the Fed’s preferred inflation gauge—increased by approximately 0.1% in April. This follows a month of no change in March, according to a Bloomberg survey of economists.
Although the tariffs’ influence on April’s inflation data is anticipated to be modest, many experts predict trade-related price pressures will become more evident in upcoming months. With the labor market remaining robust and showing few signs of stress, Federal Reserve officials appear comfortable maintaining the current interest rate stance until these trade policy effects are reflected more clearly in economic data.
Minutes from the Fed’s recent policy meeting, to be released Wednesday, may reinforce this cautious approach. Further signals are expected from upcoming speeches by regional Fed presidents Neel Kashkari and John Williams. Fed Chair Jerome Powell will also provide remarks at Princeton University on Sunday.
Meanwhile, economic growth in the U.S. is projected to slow down throughout the year. Businesses are growing more cautious amid rising tariff-related costs and subdued consumer sentiment. Alongside inflation data, Friday will also bring new figures on household spending, offering insight into consumer demand.
Economists forecast a 0.2% increase in consumer outlays for goods and services in April, down from 0.7% growth in March, excluding inflation effects. This moderation suggests consumers are becoming more cautious amid concerns about personal finances and the labor market.
Economics Commentary
“Despite subdued inflation and consumer spending, Federal Open Market Committee (FOMC) officials are likely to signal an extended period of holding rates steady. The consistent message from Fed speakers this week—including Chair Powell—will emphasize the importance of anchoring inflation expectations.”
— Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou, and Chris G. Collins
This holiday-shortened week also includes the government’s second estimate of first-quarter GDP, April durable goods orders, and consumer confidence surveys.
Global Economic Highlights
Canada
Canada’s economy is likely to fall short of the Bank of Canada’s 1.8% annualized first-quarter growth forecast, with industry data pointing to a 1.5% increase, to be confirmed Friday. King Charles III is set to outline Prime Minister Mark Carney’s priorities in a parliamentary speech on Tuesday, providing insight into upcoming government spending plans.
Asia
Asia continues to release key economic data amid the ongoing global trade tensions. Hong Kong’s April trade figures, due Monday, will be closely watched as an early indicator of the tariff impact. Sri Lanka will publish April trade data Wednesday, while Thailand and the Philippines are set to release their April export and import numbers on Friday.
Industrial production remains in focus, especially as China is set to report April industrial profits on Tuesday amid pressure from deflation and trade disputes. India’s industrial output data due Wednesday are expected to show a slowdown, with South Korea and Japan’s April production figures forecast to decline—Japan’s possibly contracting due to weakening demand.
Central banks in the region are also active: South Korea is anticipated to cut rates by 25 basis points to 2.5% on Thursday to support growth, following a similar expected move by New Zealand on Wednesday, which may reduce its policy rate to 3.25%. South Korea will also release April retail sales and May consumer confidence data.
Japan’s economic data releases this week include April producer prices on Monday, Tokyo consumer prices for May on Friday, and retail sales also on Friday. The unemployment rate is expected to remain stable in April.
India’s first-quarter GDP, expected to show growth, will be reported Friday. Australia will release April inflation and retail sales figures, with inflation continuing to run high.
Macau will report April hotel occupancy on Thursday, providing insight into Chinese tourism trends in the region.
Europe, Middle East, and Africa
Several countries observe holidays this week, including the UK (Monday) and northern continental Europe (Thursday). Ahead of the European Central Bank’s anticipated rate cut in June, officials enter a blackout period Thursday, restricting public comments. Before this, ECB President Christine Lagarde will speak Monday, joined by governors of the French and German central banks.
Inflation reports from key eurozone economies will be closely monitored. France’s consumer price growth is expected to remain steady at 0.9% on Tuesday. On Friday, Italy’s inflation is projected at 1.9%, with Spain and Germany both forecast at 2%. Together, these economies make up over 70% of the euro area. If confirmed, this will be the first time since 2021 that inflation in these nations stays below the ECB’s 2% target for May.
In the UK, economic data releases are lighter, but speeches from Bank of England officials—including Chief Economist Huw Pill on Wednesday and Governor Andrew Bailey on Thursday—may attract attention.
Switzerland will publish April export data Tuesday, revealing the impact of earlier U.S. tariffs. Sweden releases its economic tendency survey Tuesday and its financial stability report Wednesday, with GDP figures expected Friday.
Turkey’s Q1 economic growth data on Friday is likely to show continued sluggishness, as the central bank maintains high interest rates to control inflation.
Monetary Policy Updates
- Israel is expected to keep rates at 4.5% on Monday despite ongoing conflict-related challenges.
- Hungary’s central bank meeting on Tuesday may hold rates at 6.5%, among the highest in the EU.
- Mozambique is likely to cut rates for the ninth consecutive time by 50 basis points to 11.25% on Wednesday, following an easing in inflation.
- South Africa is expected to resume rate cuts on Thursday, lowering rates by 25 basis points to 7.25%, supported by favorable commodity prices.
Eswatini may also reduce its key rate on Friday.
Latin America
Brazil’s mid-month consumer price report, released Tuesday, serves as the penultimate inflation reading before the central bank’s June meeting. Rising food prices continue to pressure headline inflation.
Mexico’s central bank will release its quarterly inflation report, with many analysts anticipating a downgrade to the 2025 GDP forecast from 0.6% to near -0.2%. Minutes from the May 15 meeting will also be published. Although mid-May consumer prices surprised to the upside, the central bank’s dovish tone suggests it may overlook the increase.
Labor market data for April will be released for Brazil, Chile, Colombia, and Mexico. Unemployment is rising modestly in Chile and Brazil but remains below Brazil’s estimated non-accelerating inflation rate. Colombia’s joblessness appears to be decreasing, while Mexico’s March unemployment hit a record low of 2.22%.
Brazil will also publish its first-quarter output data Friday. After strong growth averaging 3% annually over three years, Brazil’s economy is expected to slow in 2025, though early-quarter data may not yet fully reflect this trend. The Getulio Vargas Foundation’s GDP Monitor estimated a robust 1.6% quarter-on-quarter expansion for Q1, the fastest since 2020.
