Higher inflation from tariffs is still expected to flow through the U.S. economy, but Wall Street investors aren’t expecting the price increases to show up this week.

The personal-consumption expenditures index, the Federal Reserve’s preferred inflation barometer, is forecast to rise a scant 0.1% in May in a report due on Friday morning.

The so-called core rate of inflation, which strips out food and energy, is also projected to rise just 0.1%.

If the forecasts are on target, the yearly rate of inflation would remain around 2.5%. Investors would be expected to look past the PCE and center their attention on upcoming inflation reports for June that will come out three weeks from now.

President Trump’s frustration with Federal Reserve Chair Jerome Powell over his hesitance to cut interest rates has prompted Trump to consider naming Powell’s successor as soon as this summer. But though some officials are now weighing support for a cut at the Fed’s next meeting, reluctance to ease too quickly still prevails on the Fed’s 12-member policy committee.

That could set up a divisive July decision in which two Trump-appointed Fed governors who may favor a cut will likely collide with a larger group of Fed officials who remain reluctant to ease policy, Fed watchers say.

Richmond Federal Reserve President Thomas Barkin said Thursday that the Fed should take a cautious approach to interest rates, arguing that policymakers have time to wait for more clarity before deciding to move. “The fog is dense for us too,” Barkin said at a New York Association for Business Economics breakfast. “There is little upside in heading too quickly in any one direction.” That message stands in contrast to recent comments from Fed governor Christopher Waller and vice chair for supervision Michelle Bowman, who have both signaled that the Fed’s July meeting could be “live,” meaning officials could lower rates if inflation continues to cool or the labor market shows signs of tightening. (Barron's)

The Bank of Mexico on Thursday lowered its benchmark interest rate by half of a percentage point in a split vote and left the door open for further cuts.

The five-member board of governors voted 4-1 in favor of cutting the overnight interest-rate target to 8% from 8.5%. It is the bank’s fourth straight half-point reduction, and brought the rate to its lowest level in almost three years. Deputy Gov. Jonathan Heath voted to leave the rate at 8.5%.

White House press secretary Karoline Leavitt said President Trump could extend a July 9 deadline the administration has set to arrive at trade deals with more than a dozen nations or risk the reimposition of steep tariffs. “The deadline is not critical,” Leavitt told reporters at the White House.

8:30 a.m.: Personal Income and Outlays
10 a.m.: State Quarterly Personal Income
10 a.m.: University of Michigan Survey of Consumers, Final
10 a.m.: GDP by State
3 p.m.: Agricultural Prices
4:30 p.m.: Federal Reserve Board releases annual bank stress test results

8:30 a.m.: U.S. International Investment Position
9:45 a.m.: Chicago Business Barometer - ISM-Chicago Business Survey - Chicago PMI
10:30 a.m.: Texas Manufacturing Outlook Survey
7 p.m.: U.S.-United Kingdom Economic Prosperity Deal comes into effect by the end of this month

Amid a rapidly evolving cryptocurrency environment, Coinbase Global is well-positioned to reap the benefits of further regulatory clarity and increased stablecoin adoption, Oppenheimer analysts say in a note. The space will likely see more partnerships between traditional finance and crypto native ventures going forward, which Coinbase plays a pivotal role in forming to facilitate USDC usage, the analysts say. Coinbase should also get a boost from a higher valuation of Circle, which it garners much of its revenue from, they say. They raised their price target to $395 from $293. — Kelly Cloonan

Europe is enduring above average levels of corporate distress and this is unusual, Andrew Wilkinson, a partner in Weil, Gotshal and Manges' European Restructuring team, says. Compared with cycles in the past, the current levels have been maintained since the middle of 2022 when the pandemic rescue efforts started wearing off. While there are several contributing factors, the underlying reality is there is no growth in Europe and this erodes confidence. There doesn't seem to be any sign of corparate distress abating as there is no obvious reason for sectors such as retail and consumer, industrials and real estate to become a lot less distressed, he says. Wilkinson highlights the latest Weil European Distress Index which draws on data from 3,750 listed companies. —Elena Vardon

• Global dealmaking in the first half of the year fell to a two-decade low as tariffs, high interest rates, a choppy market and uncertainty around the Trump administration’s policies stalled a rebound in M&A activity.
• The European Union is considering lowering tariffs on a range of U.S. imports in a bid to clinch a speedy trade deal with President Trump, according to people familiar with the matter.
• The intensifying conflict in the Middle East has pushed inflation higher for the first time in 2025 and weakened confidence in the eurozone, according to data released Friday.
• There is growing evidence that U.K. businesses are responding to higher employment taxes by trimming jobs and pay, rather than raising their prices, Bank of England Governor Andrew Bailey said Thursday.
• China will approve exports of “controlled items” to the U.S., its commerce ministry said Friday in response to a question about rare-earth supplies that have been a sticking point in trade negotiations.
• China’s industrial profit declined in May from a year earlier, reversing gains seen in the prior month, as weak demand and U.S. trade tariffs weighed on profitability.
• Consumer inflation in the Tokyo metropolitan area eased in June but remained firmly above the Bank of Japan’s 2% target, leaving the central bank balancing on a policy tightrope.
• Global grain production estimates for the year have risen to a record high, the International Grains Council said Thursday.

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ’s global team of reporters and editors. This newsletter was compiled by news associate Roshan Fernandez in New York. Send your tips, suggestions and feedback to roshan.fernandez@wsj.com.