Chancellor Shah says not to get too excited about rate cut prospects even after CPI
Seema Shah, chief global strategist at Principal, warned that the consumer price index in May was unchanged from the month, with an annual increase of 3.3%, increasing hopes of a rate cut by the Federal Reserve, but investors should remain optimistic.
“Today’s soft inflation data eases concerns that a strengthening labor market could push inflation back up again and could reinforce Chairman (Jerome) Powell’s belief that the hot first-quarter inflation numbers are just on the way out,” she said. A hurdle.
“While today’s inflation data suggests the Fed will cut interest rates in September, it does not reopen the door to a July rate cut,” she added. “The Fed needs today’s evidence that price pressures have weakened over the next few months as inflation continues to rise.” Only then can we have enough confidence to ease monetary policy.”
— Dara Mercado
Here’s where consumer rates lead the Fed’s decision
The Fed’s interest rate hikes have had a significant impact on consumers’ wallets, increasing the yields on their savings while also increasing financing costs.
CNBC’s data team compared interest rate levels before the Federal Reserve’s March 2022 meeting (when the Fed begins raising interest rates in its latest cycle) with last week.
Consumers are paying more to cover mortgage interest costs, with rates on 30-year fixed loans reaching 7.15%, according to MND. By comparison, the rate before the Fed’s first rate hike was 4.29%. Credit card interest rates also jumped more than 400 basis points to 20.68% as of last week, up from 16.34% more than two years ago, according to Bankrate.
When it comes to savings, however, consumer wealth has improved. The annual interest rate on a six-month certificate of deposit is currently 3.406%, up from 0.22% in March 2022, according to LendingTree. Higher interest rates are also a boon for fixed-income investors, with 10-year Treasury yields topping 4.4% last week, compared with just over 2% in March 2022, Refinitiv found.
–Darla Mercado, Nick Wells
As traders seek a clear path to rate cuts, all eyes are on the Fed’s dot plot
As the Federal Reserve’s policy meeting concludes, traders will focus on the dot plot of the Fed’s interest rate expectations.
The dot plot is policymakers’ quarterly report on the direction of the federal funds rate and is closely watched by traders.
The Fed has previously said it would cut rates three times in 2024, but given the recent strong jobs report and other upbeat economic data, many expect the forecast to show two cuts.
The latest news from the central bank and its latest interest rate decision will be released a few hours after the release of May’s consumer price index. On a monthly basis, overall CPI data remained stable compared with April but were up 3.3% from the same period last year, according to the U.S. Bureau of Labor Statistics.
— Darla Mercado, Jeff Cox
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