Rising inflation and interest rates will spur a global economic slowdown at some point, Microsoft founder Bill Gates told CNN in early May.
“(The war in Ukraine) comes on top of the pandemic, where government debt levels were already very, very high and there were already some sort of supply chain problems,” Gates said. “So I’m afraid that the bears on this one have a pretty strong argument that concerns me a lot . . .when the rich countries have these big budget problems, the health needs of places like Africa get deprioritized.”
The U.S. Federal Reserve is expected to raise interest rates again at its two summer meetings, following its 0.5% hike in early May. Central banks in other leading world economies have also raised rates to counter inflation, fueling fears that rates will rise too fast and trigger a downturn, which could turn into a recession.
But some indicators contend that inflation has already peaked. Recent Personal Consumption Expenditures (PCE) index data, which omits volatile food and energy prices, appears promising. The core index climbed 5.2% from January to March, the Bureau of Economic Analysis announced earlier in May, indicating a minor deceleration from the 5.3% pace in April and landing just below economists' forecasts.
The month-over-month core PCE rose just 0.3% through March, matching the February pace and holding below the 0.5% upticks posted from October to January.
Also, one-month trimmed-mean PCE inflation slowed to a 3.1% annual pace from the 4.0% jump seen in February. The measure suggests inflation actually peaked in January. And consumers aren’t expecting much more inflation, Business Insider reports. Citigroup's U.S. Inflation Surprise Index, which measures the degree to which inflation data exceeds or falls below estimates, has declined significantly in May, signaling inflation expectations have already hit their peak.