Traders work on the floor during morning trading at the New York Stock Exchange on May 14, 2024.
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The Consumer Price Index (CPI), a broad measure of the prices of goods and services at the register, rose 0.3% from March, the Labor Department’s Bureau of Labor Statistics said Wednesday. This was slightly below the Dow Jones forecast of 0.4%.
Stocks hit record highs on Wednesday’s weaker-than-expected economic data, fueling speculation about how soon the Fed could be ready to start cutting interest rates.
Traders are currently pricing in about a 70% chance that the U.S. will cut interest rates in September, the paper said. CME FedWatch Tools. This represents a sharp increase compared to the beginning of the week.
Jerome Schneider, PIMCO’s head of short-term portfolio management, said on Thursday that the latest U.S. inflation data confirmed to investors that the possibility of short-term interest rate hikes is no longer “unexpected.”
“If you think more contextually, I think we really need to understand that markets have been celebrating falling inflation. But in context, at PIMCO, I think we need to understand how the Fed will react “We’re especially thinking about the long-term trajectory of whether it’s going to happen based on this data,” Schneider told CNBC’s “Squawk Box Europe.”
“What’s more important is when you see it.” [at] … What’s going on within the CPI and CPI segments? [Personal Consumption Expenditures Price Index]a more common inflation measure for the Fed, remains relatively resilient,” Schneider said.
“In fact, for these key numbers to fall below 3%, we would need to see results below 0.2% for the rest of the year. We are still well above that at this point.” ”
He added that while the latest inflation numbers provided some reassurance, “that’s probably not likely at this point” given that the Fed is rapidly approaching its 2% target.
Along with the latest US inflation data, the Commerce Department says: report On Wednesday, it was announced that retail sales were flat compared to the expected 0.4% increase. The print appeared to indicate that consumer spending in the world’s largest economy was losing some momentum.
“When you combine the inflation data with the retail sales data from the beginning of the week, it’s a significant failure and the discretionary sector is really weakening, and that tells us the story of consumers who are starting to feel troubled internally. I think it’s telling. The impact of these rising rates,” Jacob Mitchell, chief investment officer and founder of Antipodes Partners, said Thursday on CNBC’s “Squawk Box Europe.”
“The market is probably thinking that soft data is starting to come out and that will make the Fed’s job a little bit easier.”
Asked if the CPI data suggested the Fed was on track to cut interest rates in September, Mitchell said, “We’re not getting what we need in key components, services and owner-equivalent rents.” I would agree with that.”
He added: “With these two factors, barring a significant decline in product volumes, we will see a base effect and a natural re-acceleration of the core in the second half of this year.” C.P.I. ”
—CNBC’s Jeff Cox contributed to this report.
