Inflation in the US slows, raising hopes of a pause in interest rates

First modification: 06/13/2023 – 18:55

The Federal Reserve kicked off its two-day monetary policy meeting on Tuesday, June 13, with a dose of good news about the Consumer Price Index, which rose at an annual rate of 4% in May.

That of the fifth month of the year was the lowest reading in more than two years, since March 2021, driven by weak food prices and the fall in energy prices. It’s also less than half the four-decade high it hit last summer and the second steepest slowdown since rates began rising.

For many, these data show that ten months of consecutive rises in interest rates have brought the country closer to its objective: to return inflation to 2% per year. For others, the road ahead remains full of obstacles.

Core prices, which exclude more volatile items like food and energy, continue to rise at an annual rate of 5.3% and have slowed down more slowly, a fact that Fed officials will watch carefully in deciding whether to pause increases. of rates.

Bets are on in the financial market

The members of the Federal Open Market Committee of the Fed will decide between this Tuesday and Wednesday if the ten consecutive rate increases are enough or if it is necessary to continue raising them.

The fresh data on inflation caused investors to practically seal their bet that the Central Bank will keep its reference rate stable at its current level of between 5% and 5.25% in the meeting that ends this Wednesday.

On previous occasions, the increases were already foreseen by most analysts, but this time there is no consensus on what is going to happen, although the balance leans towards a temporary pause.

That inflation is at 4% is considered good news and the market almost takes it for granted that the Fed will fold its arms. However, most experts estimate that there will be more increases this year. In either case, this time around will not be an easy meeting for the Fed either.

With Reuters, EFE and AP