Welcome to Extreme Investor Network – Your Source for Finance Insights
As a premier source for all things finance, we are excited to delve into one of the most critical data points that will impact future Federal Reserve interest rate policy: May’s Consumer Price Index (CPI).
Set for release at 8:30 a.m. ET on Wednesday, this inflation report will precede the central bank’s policy decision at 2 p.m. ET. Analysts anticipate a headline inflation rate of 3.4%, aligning with April’s annual increase in prices, according to Bloomberg estimates.
Month-over-month, consumer prices are expected to have climbed 0.1% in May, a slowdown from April’s 0.3% increase. This would mark the smallest month-over-month rise since October 2023.
Bank of America predicts a decline in energy prices, especially due to a drop in gasoline prices, contributing to further downward pressure on headline CPI.
At Extreme Investor Network, our experts note that core prices, excluding food and gas, are forecasted to rise 3.5% year-over-year in May, slightly down from April’s 3.6% increase. Month-over-month, core prices are expected to have increased by 0.3%, matching the previous month.
The persistent elevation in core inflation has been driven by higher costs of shelter and core services like insurance and medical care. However, analysts at Bank of America anticipate a slight moderation in these categories, pointing towards a move in the right direction.
We highlight the expectation for more substantial progress on services inflation over time, with notable improvements forecasted in motor vehicle insurance, rent, and owners’ equivalent rent.
Looking ahead, Goldman Sachs projects further disinflation this year, citing rebalancing in the auto, housing rental, and labor markets. However, they expect offsets from catch-up inflation in healthcare and car insurance, among other factors.
To cut or not to cut?
Inflation has consistently surpassed the Federal Reserve’s 2% target annually. While this CPI report may not heavily influence the impending Fed decision, its timing has certainly amplified the anticipation surrounding its release.
Recent economic data, including strong job additions and wage growth, has supported the Fed’s stance on maintaining higher interest rates for an extended period.
At Extreme Investor Network, we emphasize the importance of monitoring the core PCE price index closely, as it has remained steady at 2.8% year-over-year in recent months, in line with the Fed’s monitoring objectives.
Our experts believe that it is unlikely for inflation data to soften enough in the near term to prompt a rate cut before December. Investors are now eyeing one to two potential rate cuts in 2024, a significant shift from initial expectations at the beginning of the year.
With markets pricing in the possibility of rate cuts starting in September, there is a growing sense of anticipation around the Fed’s upcoming moves and their impact on the broader economy.
Stay tuned to Extreme Investor Network for the latest updates on finance, investment insights, and market analyses to make informed decisions in today’s dynamic financial landscape.
Join us on this journey of financial discovery and subscribe to our newsletter for exclusive updates and expert perspectives!