Key Points
- The US Federal Reserve paused interest rate hikes today at 5.25% – 5.50%.
- The decision comes after the latest CPI report released today.
According to the latest reports following the FOMC meeting, the interest rates remain unchanged, in line with market expectations.
Barron’s reports that the Federal Reserve’s policy-making committee voted to keep the benchmark interest rate steady after today’s meeting.
Here is a summary of the Fed’s decision:
- The Fed leaves rates unchanged for the 7th straight meeting.
- Officials raise the 2024 inflation forecast from 2.4% to 2.6%.
- The Median forecast shows 100 bps of rate cuts in 2025.
- The Fed said that inflation has eased, but “remains elevated.”
- The Median 2024 Core PCE inflation estimate is up from 2.6% to 2.8%.
According to official notes, the collective forecast for interest rates now implies only one quarter-point cut by the end of 2024, this being a significant shift from earlier this year.
In March, the Fed penciled a total of three quarter-point cuts.
The FOMS’s policy statement that was published today was barely changed from May to June. Reports reveal that officials removed a section detailing plans to slow the pace of its balance-sheet reduction this month.
Barron’s notes that there was one wording change higher up, acknowledging that some progress is being made in bringing inflation back to the Fed’s 2% annual target.
The CPI report released today shows an eased inflation
The CPI data revealed today showed an eased inflation – an increase of 3.3% from a year ago, remaining unchanged in May.
This is a 0% month-over-month inflation for the first time since August 2022.
Core CPI inflation fell to 3.4%, below expectations of 3.5%.
This weaker inflation could open the door to a July rate cut by the Fed, according to analysts.
According to The Kobeissi Letter, an industry-leading commentary on the global capital markets, while the CPI inflation is at 3.3%, inflation is higher in many basic necessities.
- Car Insurance Inflation: 20.3%
- Transportation Inflation: 10.5%
- Hospital Services Inflation: 7.2%
- Car Repair Inflation: 7.2%
- Electricity Inflation: 5.9%
- Homeowner Inflation: 5.7%
- Rent Inflation: 5.3%
- Food Away From Home Inflation: 4.0%
They also note that inflation has been above 3% for 38 consecutive months now.
