US Inflation Slows Down to 4% in May, Boosting Wall Street and Building Anticipation for FOMC Meeting as Interest Rates Expected to Remain Steady
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
According to the latest report from the U.S. Bureau of Labor Statistics, the inflation rate in the United States has slowed down and dropped to 4% in May. It is worth mentioning that these figures came just before the upcoming meeting of the Federal Open Market Committee (FOMC) on June 14.
#US annual #consumer #inflation comes at 4% in May, lowest since March 2021, significantly easing from 4.9% in April
Core #CPI , excluding #food and #energy , annually slows down to 5.3% in May from 5.5% in April
— Ovunc Kutlu (@ovunckutlu) June 13, 2023
Interestingly, many people believe that the Federal Reserve will likely keep the current benchmark interest rate unchanged. As a result, investors are now eagerly awaiting the upcoming FOMC meeting to discover whether the U.S. Federal Reserve will choose to raise the interest rate.
Inflation Rate Slows Down, Wall Street Gains, and Awaited FOMC Meeting
The U.S. Bureau of Labor Statistics reported that the Consumer Price Index for All Urban Consumers (CPI-U) rose by 0.1% in May, following a 0.4% increase in April. Looking at the broader picture, the overall price index has climbed by 4.0% over the past year before considering seasonal adjustments.
These numbers indicate a slowdown in the inflation rate, which is good news for consumers and policymakers as it provides some relief.
1/5 📈 The May #CPI report is out! The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1% in May, following a 0.4% increase in April. Over the last 12 months, the all items index increased by 4.0% before seasonal adjustment. #Economy #Inflation #cpidata
— ToroMarket (@estudiaphd) June 13, 2023
The positive news regarding the inflation rate had a favorable impact on Wall Street, leading to gains across all four main stock indexes. Moreover, the crypto economy experienced a 0.62% rise on Tuesday morning.
However, the prices of gold and silver in New York experienced a decline, with gold dropping by 0.23% and silver shedding 0.37%. As a result, investors are now eagerly awaiting the upcoming FOMC meeting to discover whether the U.S. Federal Reserve will choose to raise the federal funds rate.
Interest Rates Expected to Remain Steady as Positive Consumer Price Trend Persists
As we all know, the interest rate is at its highest in 16 years. According to the CME Fed watch tool, there is a strong probability that there will not be a rate hike this month, with only around 6.9% of market participants expecting a 25-basis-point increase by the U.S. central bank.
However, it’s worth mentioning that the Fedwatch tool has a good reputation for accuracy, indicating that the 25bps hike could potentially be postponed until the next FOMC meeting.
CPI solidifying market expectations for a pause at tomorrow’s meeting. Learn more about our FedWatch tool. https://t.co/65EABdBnCV pic.twitter.com/wccQ190cFP
— CME Group Interest Rates (@Interest_Rates) June 13, 2023
Jeffrey Roach, chief economist at LPL Financial, explained that the positive trend in consumer prices gives the Fed some room to maintain the current rates. He stated to CNBC on Tuesday after the latest CPI report, “If this encouraging trend continues, the Fed is unlikely to raise rates for the rest of the year.” This suggests that if consumer prices remain stable, the Fed won’t feel the need to increase rates in the near future.
This could provide some stability and predictability for businesses and consumers, as they can plan with the expectation that interest rates will stay steady for the remainder of 2023.
