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Jun 12, 2024, 2:23pm EDT
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Semafor Signals

US Fed keeps interest rates steady after positive inflation news

Insights from Bloomberg, NBC News, and The New York Times

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U.S. Federal Reserve Chair Jerome Powell.
REUTERS/Carlos Barria/File Photo
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The News

The US Federal Reserve kept interest rates steady as expected Wednesday, and suggested it could cut rates just once before the end of the year.

The decision followed new figures showing inflation cooled more than expected in May: Prices rose 3.3% year-on-year, slowing from 3.4% in April. For the first time since July 2022, prices did not rise on a monthly basis.

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SIGNALS

Semafor Signals: Global insights on today's biggest stories.

September rate cut back in play

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Sources:  
CNBC, J.P. Morgan, Bloomberg

Inflation remains above the Fed’s 2% target, so a rate cut this summer is unlikely, experts said. In a forecast Wednesday, officials only expressed slight optimism that inflation was on track to its desired level. J.P. Morgan’s chief US economist said the new inflation report “is kind of great, but it is one month,” the chief US economist at J.P. Morgan said. Based on the report, he expects to see the first rate cut in November, while some traders are beginning to predict it could happen as early as September. But as one portfolio manager at an investment firm warned: “We have a lot of data between now and then.”

Core inflation hits three-year low, but housing prices stubborn

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Sources:  
CNN, Navy Federal Credit Union

The new inflation numbers are good news for US consumers, as the “core” inflation metric that strips out volatile sectors hit a three-year low. But immediate price cuts across the board at the local grocery store or retailer are unlikely. That’s because cooling inflation only means that the pace of price increases is slowing down. Car insurance, gas, and airfare saw considerable dips, “but unfortunately home and apartment costs continue to rise and remain the main cause of inflation,” said Robert Frick, a corporate economist with Navy Federal Credit Union. “Until those shelter costs begin their long-awaited fall, we won’t see major drops in CPI.”

Welcome news for Biden, but progressives want tougher Wall Street rhetoric

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Sources:  
NBC News, The New York Times

With five months to go until the US presidential election, the inflation report was seen as good news for President Joe Biden, who has faced attacks from Republicans over grocery prices and stubborn inflation. Biden “took a victory lap” over the news, NBC News wrote, as he seeks to make the case that his administration has revived the post-pandemic economy. Biden also took a thinly veiled swipe at Republican challenger Donald Trump’s economic plan Wednesday, saying the Republican Party would allow “special interest like Big Pharma and Big Oil to keep prices high.” Progressives have urged Biden to lean harder into the message that large corporations are responsible for inflation — a notion known as “greedflation,” The New York Times reported.

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