Euro zone inflation increased to 2.6% in May from 2.4% in April, according to a flash reading from the European Union’s statistics agency. Headline and core inflation both came in higher than economists expected, but markets continued to fully price in an interest rate cut at the European Central Bank’s June meeting, following weeks of strong signalling from policymakers. Services inflation, a key metric for the ECB, rose to 4.1% from 3.7%. General view of the center of Corfu with a little restaurant in Old Town in Corfu, Greece, in May 2024. Sopa Images | Lightrocket | Getty Images

Inflation in the euro zone rose to 2.6% in May, statistics agency Eurostat said Friday, but a higher-than-expected print did not sway market bets of an interest rate cut from the European Central Bank next week.

Economists polled by Reuters had forecast a 0.1 percentage point increase from April’s headline figure of 2.4%.

Core inflation, excluding the volatile effects of energy, food, alcohol and tobacco, increased to 2.9% from 2.7% in April. A Reuters poll of economists had projected a flat reading.

The data comes with the ECB widely expected to cut interest rates at its June 6 meeting, the first reduction since 2019. The central bank for the 20-nation euro area began its latest hiking cycle in July 2022, hauling rates out of negative territory to 4% at present.

Any deviation from a 25 basis point cut at the ECB’s June meeting would be a major shock to markets, following weeks of strong signalling from policymakers.

In the wake of the reading, money markets continued to fully price in a June cut, followed by just one more reduction in 2024.

While headline inflation increased in May, fluctuations in the rate have been forecast over the coming months due to base effects from the energy market and the unwinding of government fiscal support schemes across the bloc.

Overall, the headline figure has cooled significantly from a peak of 10.6% in October 2022, languishing below 3% for the past eight straight months.

However, ECB members may pay greater attention to the rate of services inflation — a key indicator of domestic inflationary pressures — which rose to 4.1% from 3.7%.

Staff are also due to release their latest round of inflation and growth projections at next week’s meeting,

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The Commerce Department’s measure of personal consumption expenditures prices will be released Friday morning and is expected to show inflation in April running at a 2.7% annual rate, according to Dow Jones. Fed policymakers prefer the PCE measure as it accounts for shifts in consumer behavior, such as when shoppers will substitute less-expensive items for pricier ones. People shop at a supermarket in Montebello, California, on May 15, 2024.  Frederic J. Brown | AFP | Getty Images

Inflation is taking baby steps towards coming back to where policymakers want it, with a report due Friday expected to show more of that creeping progress.

The Commerce Department’s measure of personal consumption expenditures prices is expected to show inflation in April running at a 2.7% annual rate, according to the Dow Jones estimates both for overall inflation and the “core” that excludes food and energy costs.

If that forecast holds, it will represent a slight decline on the core measure and little change on the overall rate, though economists will be looking at both the annual and monthly measures. Core inflation is expected to have slowed to 0.2%, which would represent at least some further progress toward easing price pressure on weary consumers.

Overall, the report, due at 8:30 a.m. ET, likely will point to another incremental move back to the Federal Reserve’s 2% target.

“We do not expect any major upward or downward surprises in Friday’s PCE as most of the recent economic data is indicative of an economy that has settled into a nice long-term simmer of not too hot and not too cold,” said Carol Schleif, chief investment officer at BMO Family Office. “That said, getting to the Fed’s 2% target is apt to be a bumpy landing.”

Getting a handle on inflation is proving tricky these days.

The Fed parses the data in many ways, most recently introducing what has been known as the “super-core” level that looks at services costs excluding food, energy and housing as a way to measure longer-term trends.

However, policymakers’ expectations that housing inflation will cool this year have been largely thwarted, throwing another wrinkle into the debate.

Moreover, the Fed’s preference on PCE is a bit arcane, as the public focuses more on the Labor Department’s consumer price index, which has shown much higher trends. CPI inflation ran

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The world is mired in $315 trillion of debt, according to the latest May report by the Institute of International Finance.  This latest global debt wave has been the biggest, fastest, and most wide-ranging rise since World War II, coinciding with the Covid-19 pandemic.

The world is mired in $315 trillion of debt, according to a report from the Institute of International Finance.

This global debt wave has been the biggest, fastest and most wide-ranging rise in debt since World War II, coinciding with the Covid-19 pandemic.

“This increase marks the second consecutive quarterly rise and was primarily driven by emerging markets, where debt surged to an unprecedented high of over $105 trillion—$55 trillion more than a decade ago,”  the IIF said in its quarterly Global Debt Monitor report released in May.

Around two-thirds of the $315 trillion owed originates from mature economies, with Japan and the United States contributing the most to that debt pile.

However, the debt-to-GDP ratio for mature economies — which is seen as a good indicator of a country’s ability to service its debts — has been falling in general. 

On the other hand, emerging markets held $105 trillion in debt, but their debt-to-GDP ratio hit a new high of 257%, pushing the overall ratio up for the first time in three years.

China, India and Mexico were the biggest contributors, the report noted.

The IIF identified stubborn inflation, rising trade friction and geopolitical tensions as factors that could pose a significant risk to debt dynamics, “putting upward pressure on global funding costs.”

“While the health of household balance sheets should provide a cushion against ‘higher for longer rates’ in the near term, government budget deficits are still higher than pre-pandemic levels,” the IIF added.

Of the $315 trillion debt stock, household debt, which includes mortgages, credit cards and student debt, among others, amounted to $59.1 trillion.

Business debt, which corporations use to finance their operations and growth, stood at $164.5 trillion, with the financial sector alone making up $70.4 trillion of that amount. Public debt made up the rest at $91.4 trillion.

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It looks increasingly unlikely that the Federal Reserve will be cutting interest rates after a batch of stronger-than-expected economic data coupled with fresh commentary from policymakers. Economic growth is at least stable if not on the rise, while inflation is ever-present. Central bankers still lack the confidence to cut and even an unspecified few say they could be open to hiking if inflation gets worse. Traders work on the floor of the New York Stock Exchange during morning trading on May 24, 2024 in New York City.  Michael M. Santiago | Getty Images

Investors likely will have to sweat out a summer during which it looks increasingly improbable that the Federal Reserve will be cutting interest rates.

A batch of stronger-than-expected economic data coupled with fresh commentary from policymakers is pointing away from any near-term policy easing. Traders this week again shifted futures pricing, moving away from the likelihood of a reduction in rates in September and now anticipating just one cut by the end of the year.

The broader reaction was not pleasant, with stocks suffering their worst day of 2024 on Thursday and the Dow Jones Industrial Average breaking what had been a five-week winning streak ahead of the Memorial Day break.

“The economy may not be cooling off as much as the Fed would like,” said Quincy Krosby, chief global strategist at LPL Financial. “The market takes every bit of data and translates it to how the Fed sees it. So if the Fed is data dependent, the market is probably more data dependent.”

Over the past week or so, the data has sent a pretty clear message: Economic growth is at least stable if not on the rise, while inflation is ever-present as consumers and policymakers alike remain wary of the high cost of living.

Examples include weekly jobless claims, which a few weeks ago hit their highest level since late August 2023 but have since receded back to a trend that has indicated companies have not stepped up the pace of layoffs. Then there was a lower-profile survey release Thursday that showed stronger than expected expansion in both the services and manufacturing sectors and purchase managers reporting stronger inflation.

No reason to cut

Both data points came one day after the release of minutes from the last Federal Open

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Economists polled by Reuters expected a smaller fall of 0.4%. March’s figure was revised from flat to a 0.2% decline. People walk in the rain over the London Bridge in central London, March 12, 2024. Lucy North – Pa Images | Pa Images | Getty Images

LONDON — U.K. retail sales volumes dropped 2.3% in April as wet weather deterred shoppers, the Office for National Statistics said Friday.

Economists polled by Reuters expected a smaller fall of 0.4%.

“Sales volumes fell across most sectors, with clothing retailers, sports equipment, games and toys stores, and furniture stores doing badly as poor weather reduced footfall,” the ONS said.

March’s figure was revised from flat to a 0.2% decline.

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Soaring auto insurance costs have been a principle driver behind inflation over the past year, but there could be relief on the way, according to Bank of America. Motor vehicle insurance cost was up 22.6% from a year ago, the largest annual increase since 1979, according to Bank of America. Recent trends probably do not “mean that your premium will fall, but we think the rate of increase should slow,” BofA economist Stephen Juneau said. Rows of new Tesla cars are seen in a holding area near a customer collection point on April 15, 2024 in London, England. Leon Neal | Getty Images

Soaring auto insurance costs have been a principle driver behind inflation over the past year, but there could be relief on the way, according to Bank of America.

The bank’s economists see several driving factors behind the run-up in costs to ease in the months ahead, possibly taking some of the heat off a category that has pushed the Federal Reserve to keep up its inflation fight.

“The turbocharged increases in motor vehicle insurance premiums are a response to underwriting losses in the industry. Insurers saw losses,” BofA economist Stephen Juneau said in a note. However, he added, “There are signs that many insurers are getting back to profitability.”

Primarily, the hit to insurers, which has been passed on to consumers, arose from three sources: higher vehicle prices, increased costs for repairs and “more accidents as driving trends returned to normal,” Juneau said.

There’s some good news on that front.

Sales prices for new and used vehicles have been trending lower in recent months and are down 0.4% and 6.9%, respectively, on a 12-month basis, according to Bureau of Labor Statistics data through April. Also, repair and maintenance services costs were flat in April though still up 7.6% from a year ago.

Motor vehicle insurance costs, though, continued to soar.

The category rose 1.8% in April on a monthly basis and was up 22.6% from a year ago, the largest annual increase since 1979, according to Bank of America.

In the CPI calculation, auto insurance has a weighting of nearly 3%, so it’s a significant component.

The recent trends probably do not “mean that your premium will fall, but we think

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