The four-session post-Memorial-Day week ran exactly the calendar it was built around. Tuesday brought Case-Shiller, new home sales, and consumer confidence. Wednesday brought the FOMC minutes for the May 7 meeting. Thursday brought the second estimate of Q1 GDP. Friday brought the April PCE deflator. The pricing of the front and long ends of the curve barely moved from Monday to Friday, and that is the story.
The PCE print was in line, which is itself a result. Core PCE rose 0.2% in April and 3.3% year over year. Headline accelerated to 0.4% month over month and 3.8% annual, lifted by food and energy. The week-ahead framing was that a print at or above 0.3% core would push Fed funds odds toward fewer cuts and lift the long end, while a 0.1% core would do the opposite. Neither happened. The print left the September cut probability roughly where it started the week.
The income side of the release deserves the second sentence. Personal income was essentially flat, decreasing by less than $0.1 billion at a monthly rate. Nominal spending rose 0.5%. Real spending rose only 0.1%. The saving rate fell to 2.6%, near the bottom of its post-pandemic range. Households are still spending, but they are funding it out of savings rather than wage growth, and that is the cleanest single explanation for why the Fed is not getting the demand cooling it expected from this level of policy restraint.
Case-Shiller showed the housing slowdown broadening. The national index rose 0.7% year over year in March, down from 0.8%. With March CPI running 2.6 percentage points above that, real home prices declined for the 10th straight month. More than half of the 20 major metros posted annual price declines. Seattle led the decliners at -2.5%. Chicago led the gainers at +6.1%. The macro read is that housing has stopped contributing to the wealth-effect tailwind that supported 2021 through 2023 consumption, and at current real mortgage rates the path of least resistance is more cooling.
The FOMC May minutes did the predictable work of resolving the May 7 statement’s “elevated uncertainty” language into a count. The dispersion on tariff pass-through, the question of whether to look through the next two CPI prints, and the policy-outlook paragraph language are the three reads markets pulled out. None of them moved the curve hard. The 30-year sat near 5.07% Friday, marginally below the prior week’s 5.08% close. The 2-year held in a narrow range. The Fed funds path at year-end ended the week within 0.05 of where it started.
The Q1 GDP second estimate brought consumer spending revisions and the first read on Q1 corporate profits. The advance had real GDP at 2.0% annualized with personal consumption at 1.6%. The harder data on trade and inventories typically revises the headline by a few tenths in either direction. The line that matters more than the top print is real final sales to private domestic purchasers, the Fed’s preferred underlying-demand gauge, which had run 2.5% in the advance. That gauge, more than anything in the minutes, is the reason the committee can sit on hold and call it data-dependent rather than restrictive.
What it adds up to going into June. The June 18 FOMC meeting brings a fresh SEP. The March dot plot had a median of two 2026 cuts with seven participants at one and four at zero. The data the committee will use to set those new dots in June is the data that just came in this week. Core inflation is sticky at 3.3% YoY but not accelerating. Headline is running hotter on food and energy with tariff pass-through still in the mix. Housing is cooling in real terms. The consumer is spending out of savings. The labor market is drifting, not cracking.
That is the case for staying on hold through summer and starting the cutting cycle in September with the SEP revised down to one cut for 2026. It is also the case for two cuts if the next two CPI prints show goods disinflation accelerating. The market is not betting either way with conviction, and after a week of data that asked the question both ways without answering it, the 1.4 cuts priced through December are the honest read.
Next week’s calendar is lighter. ISM manufacturing Monday, JOLTS Tuesday, ADP Wednesday, ISM services Wednesday, jobless claims and unit labor costs Thursday, May payrolls Friday. The labor data is the next pressure point. A payrolls print under 100,000 would do what this week’s data did not, which is move the September cut probability decisively.