US inflation cools as service sector prices slow, potentially allowing Fed rate cuts while Europe lags
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The early PMI data signals a marked cooling of inflation pressures in the US, linked to waning price growth in the services economy.
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The PMI price data indicates inflation likely falling below the Fed's 2% target soon, contrasting with more stubborn inflation signaled in Europe.
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Key driver has been the service sector, which has overtaken manufacturing as the main source of price pressures post-pandemic.
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January saw encouraging news, with US service sector price growth slowing to the lowest since May 2020, unlike stubborn services inflation in UK and Eurozone.
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While goods prices are rising faster in US than Europe, sharp drop in overall US price pressures opens door to Fed rate cuts as ECB and BoE deterred by more elevated inflation.