The Fed is set to meet on June 14 and decide its next policy move.
Year-on-year inflation stood at 4% in May, down from 4.9% in April, according to the consumer price index (CPI) report by the US Bureau of Labor Statistics (BLS). The data comes before the meeting of Federal Reserve policymakers, who can either skip or announce another interest rate hike on June 14.
Annual Core CPI, a vital measure of inflation that excludes volatile food and energy prices, stood at 5.3%, to the expected increase of 5.3%. Monthly, core CPI climbed by 0.4%, while economists estimated a 0.4% surge. Earlier CPI reports showed that core inflation rose by 5.5% and 0.4% annually and month-over-month, respectively.
Take a Break or One Final Interest Rate Hike in July?
The latest inflation data comes ahead of the Federal Open Market Committee (FOMC). US central bank officials are set to decide on their next move regarding interest rates and determine the long-term monetary policy trajectory.
Investors and market watchers hope today’s data will convince the Federal Reserve policymakers to skip a rate hike this month – a move could reignite optimism in the US stock market after a tumultuous 2022. While the annual inflation rate declined significantly from its peak of 9.1% in June last year, the core CPI has been much more difficult to tame.
Since May 2022, the Fed has consistently raised interest rates to bring down 4-decade-high inflation, bringing the federal funds rate to a 5.00% – 5.25% range – the highest level since September 2007. But even though markets are mainly expecting the Fed to slam on the brakes, another likely possibility is a final rate hike in July before an extended pause estimated to last until early 2024, according to CME Group’s gauge of trading in the Fed funds futures market.
Neither the author, Timothy Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
***
This article was originally published on The Tokenist. Check out The Tokenist’s free newsletter, Five Minute Finance, for weekly analysis of the biggest trends in finance and technology.