In what is certainly a positive outcome for the market, US inflation has fallen to 3% in June 2024, lower than expected. The decrease is a noted drop from May’s 3.3% figure, and is an important part in the Federal Reserve’s decision-making regarding interest rate cuts for this year.
Bank of America analysts predicted the fall, while noting the data is a “good print for the Fed.” The continued cooling of the country’s inflation is good news for a market hopeful that the Central Bank begins cutting rates in September.
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US Inflation Falls as The Market Awaits Rate Cuts
For much of the Federal Reserve’s tightening campaign of the last several years, they have held firm to their 2% inflation target. That has forced mostly inaction from the Fed regarding rate cuts. Therefore, interest rates have remained at a 23-year high while inflation continues to show resilience.
The Central Bank could finally have some confidence through last month’s data. The Bureau of Labor Statistics shows that US inflation has fallen to 3% in June. Specifically, dropping from last month’s figure. Now, all eyes are on how Fed Chair Jerome Powell and the agency will respond.
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The Fed has already said they are waiting on more evidence that inflation is retreating to 2% before implementing cuts. Yet, the market has some interesting predictions. Currently, CME’s FedWatch tool shows a 75% chance that the Fed will cut rates at its September meeting.
The agency is currently balancing the inflation fight with preventing the economy from slowing. In June, unemployment increased to its highest level since 2021. That has always been a concern for the Fed. Whether or not this forces cuts before the 2% target remains to be seen.