Key highlights:

• GDP growth slowed in Q1 to a sub-trend 0.3% q/q, but this was largely due to inventories, with domestic final demand growth strengthening.
• There were some positive signs in the March PCE inflation data – with underlying measures printing on the low side (by recent standards) but further low prints are required to confirm inflation is decelerating, particularly given still elevated wage growth.
• We expect the Fed to hike rates by 25bp at its meeting this week and then to pause (at a target range of 5.00% to 5.25%). However, until clearer signs of a deceleration in inflation emerge, the risk remains that the Fed will take rates higher.

Find out more in NAB’s US Economic Update (May 2023)