September 11, 2024 Top Stocks For Smart Investment Choices
September 8, 2024 S&P 500 In Freefall: Is This The End Of The Bull Market?
September 6, 2024 Jobs Report Spotlight As Fed Weighs Rate Cut Decision
August 26, 2024 NVDA Earnings Report Insights
Microsoft: Buy In Time For AI Payoff
Tesla’s iTaxi Moment
Nvidia: Up 140% This Year And Still Undervalued
Nvidia: Time To Load Up
Apple’s China Problems Are Likely Not Going Away With iPhone 16
April 23, 2024 Maximizing Profits: When is the Right Time to Sell Your Business?
April 12, 2024 Improve Your Financial Status: A How-To Guide
April 12, 2024 How ZIM Integrated Container Tracking is Revolutionizing Global Trade
March 15, 2024 6 Best Growth Stocks To Buy Now According to Metatrader 5
Inflation Eases, but Still Double the Federal Reserve’s Target: Eyes on the Latest US Labor Department Data
July 12, 2023
The impact of the pandemic led to a significant surge in inflation as a large number of Americans, with money but nowhere to go, resorted to purchasing goods. This resulted in a significant challenge for manufacturers to meet up with the increased demand. Initially, there was a rise in the prices of goods, and subsequently, as lockdowns eased, the costs of services also climbed. The rate of price increase was the highest in 40 years, with the Consumer Price Index (CPI) increasing to a year-on-year rate of 9.1% in June 2022. By August, the core CPI, excluding food and energy, had hit a peak of 6.3%.
Inflation Trends and Federal Reserve Response
Fast forward to May 2023, the inflation situation had calmed down and rates had reduced. The CPI came in at 4.0% year-on-year, and the core CPI was at 5.3%. However, this was still double the Federal Reserve’s target of 2%. In response, the FOMC officials signaled further rate hikes to cool down the economy and reduce the trajectory of prices. Market traders also expected the Fed to increase its policy rate by 25 basis points to between 5.25% and 5.50% later in the month, with a 92.4% probability attached to this outcome, according to the CME’s FedWatch Tool.
Latest Inflation Data and Market Predictions
Attention has now shifted to the latest inflation data, with the U.S. Labor Department set to release its June CPI report. Economists expect the headline number to rise by only 3.1% year-on-year in June, down from 4.0% in May. The core CPI is also expected to increase by 5.0%, which is a decrease from 5.3% in the previous month. On a month-over-month basis, CPI and core CPI are expected to rise by 0.3%, in contrast to 0.1% and 0.4% in May, respectively.
Analysts’ Expectations and Market Influences
According to SA analyst Christopher Robb, there’s a high chance that CPI could decrease more than the consensus, citing the 4.2% drop in used car prices in June as per the Manheim Used Vehicle Value Index. He also mentions signs that deteriorating housing affordability could lead to a double relief to core inflation. However, other analysts like Damir Tokic anticipate inflation resumption and believe the Fed’s decision to pause rate hikes in May was erroneous.
Influence of CPI Report on Markets
While economists focus on the CPI, SA analyst Mike Zaccardi has noted that the report’s impact on markets has been waning recently. He stated, “Options traders have priced in about a 0.8% move up or down by Wednesday’s closing bell when analyzing at-the-money straddle price.” Thus, no significant market movement is expected. However, the Fed will definitely monitor inflation trends closely in preparation for its July 26 rate decision.