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  • Scott Poore, AIF, AWMA, APMA

Inflation Cools, Rate Cut Hopes Alive




Cooler inflation data and comments from the Fed caused rate cut hopes to improve.

Both the Consumer Price Index and the Producer Price Index came in lower than expected last week. On a month-over-month basis and a year-over-year basis the two metrics were lower. Among some of the individual components of CPI, some services categories - auto insurance, vehicle repair, and physicians' services - were lower than the previous month and appear to have possibly peaked. A steep drop in airline airfare and gasoline in May's reading of inflation is timely for consumers who will be taking Summer vacations.


The probabilities for a September rate cut by the Fed moved higher on Friday from 55% one week prior to 61%.

This helped push equities higher last week. The Fed's comments from the FOMC meeting last week confirmed the September rate cut hopes, but the new "Dot-plot" of future rate expectations shows the mean rate cuts of only 1 in 2024 but 2-3 cuts in 2025. Meanwhile, the National Financial Conditions Index and the Financial Stress Index reflect loose financial conditions and are not pointing toward a recession in the immediate future. The Atlanta Fed's GDPNow estimate is projecting +3.1% growth in the 2nd quarter. For now, it's steady as she goes for markets.

 

Disclosures


The information contained herein is for informational purposes only and is developed from sources believed to be providing accurate information. The opinions expressed are those of the author, are for general information, and should not be considered a solicitation for the purchase or sale of any security. The decision to review or consider the purchase or sell of any security should not be undertaken without consideration of your personal financial information, investment objectives and risk tolerance with your financial professional.


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