Latest / Markets with Megan: A Quick Financial Markets Update / Analyzing the Fed's Updated Inflation Expectations | Episode 144 | 06-12-24
Transcript
- 0:01Megan Horneman: Well, we're back for round two of Our Markets with Megan.
- 0:04Megan Horneman: Today it is Wednesday, june 12th, and this morning we came to you with the Consumer Price Index report from May, and now we're coming to you with the June Federal Reserve meeting.
- 0:14Megan Horneman: This was a very highly anticipated meeting.
- 0:18Megan Horneman: There was no expectation that they would cut interest rates at this meeting, and they did not.
- 0:22Megan Horneman: They kept interest rates unchanged.
- 0:24Megan Horneman: But the focus was on how they would word this.
- 0:27Megan Horneman: What was their expectation for the rest of this year?
- 0:31Megan Horneman: What would they do with their expectations for both unemployment, inflation, the Fed funds rate, as well as GDP?
- 0:39Megan Horneman: So let's take a look at what they did come out with.
- 0:42Megan Horneman: So for the Fed projections, the median projection for 2024 in regards to GDP did not change it's 2.1%.
- 0:51Megan Horneman: The unemployment rate also did not change, looking for 4% this year.
- 0:56Megan Horneman: And then the median projection for core PCE actually did increase a bit to 2.8% versus 2.6%.
- 1:05Megan Horneman: So if you have an increase in the median expectation for core inflation, which is their PCE, is their preferred measure, that would typically translate into the expectation for less interest rate cuts, and that's what we got in this report.
- 1:20Megan Horneman: Right now, fed officials are only expecting one interest rate cut this year.
- 1:24Megan Horneman: We don't know the timing of that.
- 1:26Megan Horneman: That is down from their March projection.
- 1:29Megan Horneman: I'm seeing three interest rate cuts Now.
- 1:32Megan Horneman: They reiterated in their press conference that they remain data dependent and we realize that they were given the report from this morning and they could make adjustments if necessary, but they did not.
- 1:42Megan Horneman: They think that there is progress being made on inflation but they're not there yet.
- 1:47Megan Horneman: And this is what we've been saying frequently, that inflation is getting better.
- 1:52Megan Horneman: We say better from a very high point but when you're still growing over 3% on an annual basis, that is continuous strain on consumers and that is still an inflationary environment.
- 2:05Megan Horneman: And the Fed did come through and say that today that they're more concerned about getting that down, being confident that it's coming down to their target before they even talk about interest rate cuts.
- 2:16Megan Horneman: They did make one comment there's been some wrangling around.
- 2:20Megan Horneman: When we got some hotter than expected reports earlier this year that we may see an interest rate hike, they said there were no committee members that actually talked about an interest rate hike at this time.
- 2:31Megan Horneman: So the markets we had a great rally after the CPI report.
- 2:34Megan Horneman: That has given quite a bit of that back, basically flat here in the equity markets, bond markets.
- 2:39Megan Horneman: The yields did go up a bit, but still they're lower on the day.
- 2:43Megan Horneman: There's a lot more information to come out from the PPI, pce, the employment report.
- 2:51Megan Horneman: We'll get data on ISM manufacturing, ism services.
- 2:54Megan Horneman: All these things will come out before they meet next.
- 2:57Megan Horneman: So there's a lot of information to go through and we'll be sure to come back to you to reiterate our view, talk about what we think and, if that changes anything, where we expect the Fed going with interest rates.
- 3:07Megan Horneman: If you have any questions or comments, please feel free to reach out to podcasts@verdence.
- 3:10Megan Horneman: com.
- 3:12Megan Horneman: Thank you.