Inflation print comes in cooler than expected, stocks flat

Thursday’s CPI report shows prices are coming down more quickly than analysts had anticipated, renewing hope that central bankers will cut rates in the fall

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Federal Reserve Chair Jerome Powell | "_DSC6402_pw"/Federal Reserve (CC license)

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Prices increased less than anticipated last month, according to the latest inflation print released Thursday. 

The consumer price index (CPI) for June showed a 3% increase year-over-year, coming in just below analysts’ expectations of a 3.1% increase, according to the US Bureau of Labor Statistics. So-called core CPI, which excludes volatile food and energy prices, showed a 3.3% annual increase.

The annual inflation rate is now the lowest since June 2023 and core CPI has cooled to its lowest annual level since April 2021. 

The print was enough to boost expectations that the Federal Reserve may opt to lower interest rates in September. Odds of a cut in the fall increased to 83% Thursday morning, according to federal funds futures markets and CME Group

Read more: On the Margin Newsletter: Are rate cuts bearish for risk assets?

“While one inflation report won’t make up policymakers’ minds on its own, the figures add to the body of evidence pointing towards a September rate cut, following last week’s softer-than-expected June jobs report, and coming after [Fed Chair Jerome Powell’s] Congressional testimony earlier this week, in which Powell struck a more cautious tone, noting how the economy is no longer ‘overheated’ and that the jobs market is ‘fully’ back in balance,” Michael Brown, senior research strategist at Pepperstone, said. 

US stock futures were relatively flat on the news shortly after the report was released. At the open, the S&P 500 and Nasdaq Composite indexes were just barely in the green. 

Bitcoin and ether also moved into the green following the inflation print, gaining roughly 1% and 2%, respectively. 

Ether’s recent rally, which has seen the crypto gain as much as 13% since Sunday, can likely be attributed to increasing optimism that an ether ETF will debut in the coming days. Issuers are updating their S-1 documents, people familiar with the matter told Blockworks, a final step before the products can list. 

On Tuesday and Wednesday, Powell appeared before the Senate Banking and House Financial Services Committees on Capitol Hill to answer questions about the state of monetary policy. He was careful not to reveal any specific timeline, but he did note that the key focus of central bankers right now is ensuring a “soft landing,” or the coveted balance between bringing down rates without damaging economic growth. 

“Trying to make decisions that give that the best chance to happen…is the thing that I think about in the wee hours,” Powell told HFSC members Wednesday.


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