9 months ago • 2 mins
What’s going on here?
Fresh inflation data out on Tuesday could justify a pause on the Federal Reserve’s (the Fed) enduring rate-hike spiel.
What does this mean?
Inflation’s like your friend’s up-and-down relationship: it’s talked about a lot, it sounds kind of toxic, but it matters to you and so you care about it. Well, this week inspired some hope of a happily ever after. The Fed’s been tipped to pause its rate-hiking tirade, even if for just a short time. And this latest data’s added weight to those predictions: May’s prices were up a less-than-expected 4% from the year before, the smallest increase for two years. And sure, core inflation – excluding volatile prices like food and energy – was a bit sharper at 5.3%, but it’s still moving in the right direction.
Why should I care?
For markets: The devil’s in the detail.
Numbers like that bundle a heap of categories together. And that’s what matters: even if we pay more for some costs and less for others, the total should average out. Still, though, it’s hard to wrap your head around today’s trends: gas and oil prices fell by 6% and 8% respectively from April to May, but shelter and transport costs are still burning hot to the touch. And that cacophony of volatility will keep the Fed on its toes.
The bigger picture: Moods swing.
You’d think treacherous inflation and uncertain interest rates would’ve done a number on the stock market, but investors have been surprisingly upbeat so far. Even when inflation hit boiling point last year, the market seemed optimistic that the climate would return to a simmer in the months ahead. And now that the economy’s getting chillier, the market’s more focused on a buzzing, artificial intelligence-fueled future. So it’s understandable if you want to play Goldilocks and believe the environment’s just right, but remember: the market can turn cold faster than your morning serving of oatmeal.
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