Tuesday, October 3, 2023
HomeEconomyJune inflation data may have pushed the Fed over the hill

June inflation data may have pushed the Fed over the hill


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Author: Howard Schneider

WASHINGTON (Reuters) – Inflation in the U.S. hits A year after the peak and sparked an aggressive shift in monetary policy, Fed officials are likely to do more in an encouraging chapter in their policy discussions, with analysts expecting a flurry of data showing a steady decline in key price indicators.

The U.S. Labor Department reported on Wednesday that consumer prices rose 3% in June at an annual rate, below the forecast of economists in a Reuters poll and the most since March. Minimum value of 200. This marks a sharp drop from May’s 4% and June topping 9% 52, which is the highest level in four decades.

, a separate measure of underlying inflation that excludes items such as energy and food that are linked to world commodity markets, slowed from 5.3% in May. to 4.8%, the largest drop in more than three years.

With the Fed tightening in the past, this may just be the beginning of what economists are starting to see as a more permanent “deflation” that will start to see slowing hiring and weaker demand this year.

Prices for many goods fell across the board in June, with food costs rising only marginally, amid evidence that the pace of price increases in services is slowing in an area of ​​the economy that Fed officials fear will be hard to change.

Omair Sharif, president of Inflation Insights, noted that prices last barely rose this month, and growth in services outside of housing and energy is expected to continue to be weak.

This may help lower headline inflation when the next CPI report is released in August , details in Wednesday’s report suggest any July inflation forecast.

The June report was “the first report in which we expect inflation to trend closer to target”. Rick Rieder, Chief Investment Officer, Global Fixed Income, BlackRock (NYSE: 52black

). “We should see these types of numbers in the domestic inflation report in the next few months.”

Lael Brainard, former Fed Vice Chair, current The White House National Economic Council, a Fed director, touted the release of the consumer price index as evidence that the country is winning the fight against inflation without the labor market suffering heavily.

“The economy is defying forecasts that inflation won’t fall in the face of massive job losses,” Brainard said at an event at the Economic Club of New York. “Just today, we saw encouraging new evidence that the economy is heading toward benign inflation, while the job market is resilient. ”

However, a month of good inflation news is unlikely to prevent the Fed from raising its benchmark overnight rate by another quarter of a percentage point to 5. %-5.% July range – policy meeting. Investors still invested more than % probability of such actions.

In fact, on Wednesday at least one Fed official stuck to the hawkish mantra prevailing among policymakers that inflation remains too high. High.

While not specifically mentioning the CPI report, Richmond Fed President Thomas Barkin told a Maryland business group that he still thinks inflation is “stubbornly persistent.” “.

“Inflation is too high no matter how you cut it,” he said, adding that he agreed that overall demand was starting to slow, but he wanted to The data “believes” this will translate into lower inflation.

The Fed’s inflation target is 2% as measured by the separate PCE price index, and a much-talked-about version of it that also removes volatile natural Food and energy prices have been falling since December remained at around 4.6%.

US central bank officials said they need to see the data fall steadily to be satisfied that inflation is under control and sustainable back to the 2% target.

‘Last Game’



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