Fed Pauses Interest Rate Hike as Inflation Improves

Despite inflation continuing to remain elevated above the 2% rate the Federal Open Market Committee (FOMC) is seeking to achieve, gradual progress to ease price pressures by aggressively increasing interest rates has lowered inflation to “around half last year’s peak.” The June 14th news release by the Fed announced decisions by the FOMC to pause a rate hike at this time and “maintain the target range for the federal funds rate at 5 to 5 ¼ percent. The news comes just one day following the release of the May 2023 Consumer Price Index for All Urban Consumers (CPI-U) by the U.S. Bureau of Labor Statistics (BLS), which rose 0.1 percent on a seasonally adjusted basis, after increasing 0.4 percent in April; and the all items index less food and energy, also known as the core consumer price that is the preferred indicator among economists of underlying inflation, rose 0.4 percent for the third consecutive month. On a year-over-year comparison, core prices in May rose 5.3%, representing a moderate improvement over the 5.5% increase in April. Apartment rent growth, which had surged earlier, continues to contribute in part to elevated core prices, but a recent slowdown in rent growth resulted in a just under 2% decline year-over-year in May, in comparison to the double-digit increases a year ago; and once showing up in inflation data, will take pressure off core consumer prices. Although predictions of a looming recession continue to circulate, the U.S. economy has continued to maintain momentum. However, a possible “credit crunch” due to the March collapse of a few regional banks could reverse that momentum.

Source:    https://www.wsj.com/articles/consumer-price-index-report-may-inflation-cafcbef5

Source:    https://www.federalreserve.gov/newsevents/pressreleases/monetary20230614a.htm