Recent data on the performance of the U.S. economy has been generally on the soft side, a sore point discussed at length by Federal Reserve officials at their latest meeting, minutes of the gathering released on Wednesday showed.
Of particular concern for the Fed are recent undershoots on key gauges of inflation that have been lagging the central bank's stated target of 2 percent annualized consumer price growth.
Meanwhile, inflation reports from Europe have topped expectations by the widest margin on record. The rest of the so-called Group of 10 largest developed economies are meanwhile beating forecasts by the most since the financial crisis nearly a decade ago, even after taking into account the drag from U.S. numbers. Even Japan, notorious for its decades-long struggles against deflation, is posting inflation data notably above forecasts.
The upshot is that the inflation "surprise" gap between the United States and Europe has never been wider. Between the United States and the rest of its G-10 peers, that gap is the widest in 15 years.
The next chance for that gap to narrow comes in the week ahead when the personal consumption expenditures price index for April is reported by the Bureau of Economic Analysis. In March, the core PCE rate, excluding food and energy costs and considered the Fed's favored measures of inflation, fell further from the Fed's target
Tuesday's PCE release will also be the Fed's last piece of key inflation data before policymakers gather in mid-June for their next rate-setting decision
Reference: Reuters
Read more: http://www.reuters.com/
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