Don’t get too excited about rate cut prospects just yet, even post CPI, Principal’s Shah says
May’s consumer price index reading — which was flat on a monthly basis and up 3.3% from a year earlier — boosts hopes for rate cuts from the Federal Reserve, but investors should keep their optimism in check, warns Seema Shah, chief global strategist at Principal Asset Management.
“Today’s soft inflation print eases fears that labor market strength may drive renewed inflation strength and likely reinforces Chair [Jerome] Powell’s conviction that the hot inflation data of Q1 was just a bump in the road,” she said.
“While today’s inflation print keeps a September Fed cut firmly in the picture, it does not reopen the door to a July cut,” she added. “The Fed will need today’s evidence of softer price pressures to be also corroborated in the next few months’ inflation prints before it can be sufficiently confident to ease.”
— Darla Mercado
Here’s where consumer rates stand ahead of the Fed’s decision
The Federal Reserve’s rate-hiking campaign has had a notable impact on consumers’ wallets, boosting the yields they earn on savings while also increasing financing costs.
CNBC’s data team compared where rates stood prior to the Fed’s March 2022 meeting – where it began raising rates in this latest cycle – versus last week.
Consumers are shelling out more to cover the interest costs on mortgages, with the rate on the 30-year fixed loan reaching 7.15%, according to MND. That’s compared to the rate of 4.29% just prior to the Fed’s initial move to hike rates. Rates on credit cards have also jumped more than 400 basis points, sitting at 20.68% as of last week, up from 16.34% more than two years ago, per Bankrate.
When it comes to saving, however, consumers’ fortunes have improved. The annual percentage yield on a six-month certificate of deposit is now at 3.406%, up from 0.22% in March 2022, per LendingTree. The higher rates have also been a boon for fixed income investors, as the 10-year Treasury yield topped 4.4% last week, compared to its rate of just over 2% in March 2022, Refinitiv found.
–Darla Mercado, Nick Wells
All eyes are on Fed’s dot plot as traders look for clarity on rate cut path
Traders will have their focus on the Federal Reserve’s dot plot of interest rate expectations as the central bank concludes its policy meeting.
The dot plot, a quarterly report of where policymakers see the fed funds rate heading, is closely watched by traders.
Earlier, the Fed had indicated three rate cuts for 2024, but given a recent blast of strong jobs reports and other upbeat economic data, many are expecting the forecast to show two reductions.
The central bank’s updates — and its latest rate decision — are coming out just hours after May’s consumer price index reading. On a monthly basis, the headline CPI reading held steady from April, but it rose 3.3% from a year earlier, according to the Bureau of Labor Statistics.
— Darla Mercado, Jeff Cox
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