Inflation Data Boosts Hopes for Fed Rate Cuts by Year-End
By: Movement Staff
May 17, 2024
Sticky inflation remains the key obstacle to the Federal Reserve cutting interest rates, but Wednesday's inflation data offered encouraging signs. The Core Consumer Price Index (CPI) for April rose by 0.3% month-over-month and 3.6% year-over-year. The CPI is a critical measure used by the Fed to gauge inflation, excluding the volatile categories of food and energy. Although still above the Fed's target, this marks a cooling from March's figures.
The Federal Reserve has indicated they won't wait for inflation to hit 2% before cutting the federal funds rate; they just need to see consistent progress.
Investors and market participants closely watch reports like the CPI index to anticipate the Fed's next moves, as changes in the federal funds rate can impact borrowing costs for lenders and borrowers, including mortgage rates. Economists are predicting two separate 25 basis point (0.25%) cuts by year-end. Upcoming employment and inflation reports will be crucial in determining if this outlook holds.
The Federal Reserve has indicated they won't wait for inflation to hit 2% before cutting the federal funds rate; they just need to see consistent progress.
Investors and market participants closely watch reports like the CPI index to anticipate the Fed's next moves, as changes in the federal funds rate can impact borrowing costs for lenders and borrowers, including mortgage rates. Economists are predicting two separate 25 basis point (0.25%) cuts by year-end. Upcoming employment and inflation reports will be crucial in determining if this outlook holds.
