Consumer Price Index (CPI) rose by 3.3% year-over-year in May, a deceleration from previous month's annual gain of 3.4%
CPI report shows disinflation process continuing, most investors expect one rate cut for the rest of 2024
Federal Reserve Chair Jerome Powell wants more data to determine if inflation is falling towards goal before cutting rates
Federal Reserve expected to keep interest rates steady on June 12, 2024
Fed will release updated forecasts for inflation, economy, and unemployment during meeting
Investors question if Fed will reduce rate cut estimate from three to two or one for the rest of 2024
Odds of first rate cut in September rose following CPI report on June 12, 2024
The Federal Reserve is expected to keep interest rates steady at their current level during their meeting on June 12, 2024. The Consumer Price Index (CPI) rose by 3.3% year-over-year in May, which was a deceleration from the previous month's annual gain of 3.4%. This moderation in inflation has led some investors to question whether the Fed will reduce their estimate of three rate cuts for the rest of 2024 to two or even one instead. However, Federal Reserve Chair Jerome Powell has made it clear that the central bank will need more than a quarter's worth of data to determine if inflation is steadily falling towards its goal before cutting rates.
The CPI report showed that both the overall index and the core index, which excludes volatile food and energy prices, saw deceleration in annual gains. Economist Tendayi Kapfidze of Wells Fargo commented on the report, stating that it shows the disinflation process is continuing. Despite this improvement, most investors now expect just one rate cut for the rest of 2024.
The Federal Reserve will also release updated forecasts for inflation, the economy, and unemployment during their meeting. The odds of a first rate cut in September rose following the CPI report on Wednesday morning. However, two more inflation reports showing improvement would likely be needed for the central bank to pull the trigger.
Fed watcher Peter Tchir believes that Powell wants to get one rate cut done before the November election and one or two after it. He added that any hike this year is completely off the table.
The Fed's decision on interest rates will have a significant impact on borrowing costs for consumers, businesses, and governments. The housing market could also be affected by the central bank's monetary policy.
The Consumer Price Index (CPI) rose 3.3% over the prior year in May.
Fed Chair Jay Powell has made clear that the Fed will need more than a quarter’s worth of data to make a judgment on whether inflation is steadily falling toward its goal of 2% before cutting rates.
Accuracy
The year-over-year change in ‘core’ CPI, which excludes volatile food and energy prices, was 3.4% compared with 3.6% in April and 3.8% in March.
Fed policy makers received a cooler-than-expected reading on inflation on May 11th.
Inflation is hurting lower- and middle-income consumers by raising the costs of goods and keeping borrowing costs high.
The Federal Reserve is expected to release its latest policy statement on Wednesday, June 12, 2024.
Many economists predict that the first chance of relief from high interest rates could be at the Fed’s September 18 meeting.
Accuracy
Economists predict that the Fed will keep interest rates steady in a range of 5.25% to 5.5%.
Many economists predict that the first chance of relief from high interest rates could be at the Fed’s September 18 meeting, with about half expecting a rate cut for that date.
If the inflation data shows signs of improvement, it could help give policymakers the confidence to dial back their benchmark rate within a few months.
Mortgage rates aren’t directly set by the Fed, but its benchmark rate influences them. Without a rate cut on the horizon, mortgage rates could hover around 7% for a while.
Deception
(50%)
The article contains selective reporting as it only reports details that support the author's position of consumers wanting the Federal Reserve to cut interest rates. The author also uses emotional manipulation by stating 'inflation-weary consumers are eager to learn when the central bank might start cutting its benchmark interest rate, providing some relief from high borrowing costs.' This statement is designed to elicit an emotional response from readers and create a sense of urgency.
With inflation-weary consumers eager to learn when the central bank might start cutting its benchmark interest rate, providing some relief from high borrowing costs.
Many economists still think the Fed will cut rates at some point in 2024–just not at the June 12 meeting.
The delay in cutting rates is hurting lower- and middle-income consumers, who are struggling on two fronts, Rich noted: Inflation remains elevated, raising the costs of everything from groceries to rent, while borrowing costs are also high.
Fallacies
(85%)
The article contains an appeal to authority and a potential false dilemma. It heavily relies on the opinions of financial experts and the Federal Reserve's predictions for interest rate cuts, creating an impression that these are the only factors influencing the decision-making process.
. . .almost all economists polled by financial data firm FactSet are predicting that monetary policy makers will maintain the federal funds rate in a range of 5.25% to 5.5% . . .
