Key highlights:

• US GDP growth moderated in Q1, but it was still a solid result. While a bit lower than we expected we have left our 2024 GDP forecast unchanged.
• Overall, the various indicators continue to point to a gradual softening in labour market pressures, although the Employment Cost Index grew more strongly than expected in Q1.
• Q1 core PCE inflation was well above the Fed’s target. We still consider that inflation will ease from here and track back towards the Fed’s 2% target.
• The Fed left rates on hold at its May meeting. We expect the next move will be a cut, most likely in September. If there are further inflation disappointments, the Fed’s initial step will be to remain on hold for longer as it considers policy to be clearly restrictive, setting a high bar for rates to be hiked.

Find out more in NAB’s US Economic Update (8 May 2024)