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U.S. economy on the path to a "Goldilocks" scenario in 2024 - Bank of America

Published 06/17/2024, 10:35 AM

Investing.com -- Investors trying to get a handle on the strength of the U.S. economy -- and the timing of Federal Reserve interest rate cuts -- will be looking closely at Tuesday’s retail sales data for May.

Economists are expecting retail sales to have risen 0.3% month-on-month, after the figure came in at 0.0% in April, lower than projections.

Consumer spending is an area of focus for Wall Street as traders seek to gauge the impact of higher interest rates on the economy. Last week, the Fed reiterated that it needs to see more evidence that inflation is sustainably cooling down to its stated 2% target before beginning to lower borrowing costs.

Several Fed officials are also due to speak throughout the week, including New York Fed President John Williams, Minneapolis Fed President Neel Kashkari, San Francisco Fed President Mary Daly and Richmond Fed President Thomas Barkin. On Friday, Chicago Fed President Austan Goolsbee said that while he felt "a little bit of relief" that price pressures in the U.S. showed signs of abating in May, he would like to see "more months" of similarly easing data prior to slashing rates.

In a note to clients on Monday, analysts at Bank of America Securities said the "best-case scenario" for the U.S. economy "has played out," with consumer price growth softer than expected and the latest jobs report pointing to resilience in labor demand. They added that they believe the economy is facing a "goldilocks" outcome: moderating but stable activity coupled with decelerating inflation.

As a result, they said the market "has now shifted its focus from rates to growth," and a solid retail sales reading should alleviate some concerns around wider economic activity.

"Good news should be good news as long as inflation remains in check," they noted.

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