Fed seen on track to resume rate cuts after inflation, job market data
The Federal Reserve's path to interest rate cuts starting in September appeared to widen on Thursday, after a pair of government reports pointed to cooler inflation and signs of potential weakening in the labor market.
U.S. producer prices advanced 2.6% in May from a year earlier, after rising 2.5% in April, the Labor Department reported. Taken together with tamer-than-expected increases in the Consumer Price Index in May, economists estimated that inflation by the Fed's preferred gauge of underlying price pressures, the core Personal Consumption Expenditures Price Index, likely rose in line with the Fed's 2% goal last month.
Economists still expect the Trump administration's tariffs to push up prices and lift inflation later this year, but "the near-term trend remains favorable, enabling the (Fed) to signal next week that it still intends to begin easing policy again later this year," economists at Pantheon Macroeconomics wrote. They estimate that core PCE rose by just 0.12% in May from April, based on the latest PPI and CPI data. Economists at other Wall Street firms issued similar estimates.
The Fed is nearly universally expected to leave its policy rate in the 4.25%-4.50% range at its June 17-18 meeting. Futures that settle to the Fed's policy rate show traders now expect a quarter-percentage-point reduction by September, with another such move likely in October. Before Thursday's data, traders had expected the Fed to wait until December to deliver a second rate cut.
The U.S. central bank cut rates three times in 2024. A separate Labor Department report on Thursday showed initial weekly claims for jobless benefits held steady at a seasonally adjusted 248,000 for the week ended June 7, while continuing claims jumped to 1.951 million, their highest level since November 2021 and a sign that it is getting harder for unemployed workers to find a new job.
"Americans, especially recent graduates, are worried about how hard it is to find a job," said Heather Long, chief economist at Navy Federal Credit Union.
"If layoffs worsen this summer, it will heighten fears of a recession and consumer spending pullback."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Zawya
20 minutes ago
- Zawya
US agency streamlining self-driving car exemption reviews
The National Highway Traffic Safety Administration on Friday said it was streamlining reviews of requests filed by automakers seeking to deploy self-driving vehicles without required human controls like steering wheels, brake pedals or mirrors. NHTSA has authority to grant petitions to allow up to 2,500 vehicles per manufacturer to operate on U.S. roads without required human controls but the agency has spent years reviewing several exemption petitions without taking action. Automakers have expressed frustration with the agency's slow reviews of autonomous vehicles. Under the law, fully self-driving vehicles do not need NHTSA approval if they have required human controls. Manufacturers must demonstrate vehicles without human controls provide an equivalent safety level and exemptions are in the public interest. In 2018, GM petitioned NHTSA to deploy up to 2,500 cars without steering wheels or brake pedals on U.S. roads. In 2020, GM withdrew the petition. GM in 2022 again sought NHTSA approval to deploy vehicles without human controls. GM withdrew the petition in October. Ford in 2023 withdrew its self-driving petition filed in July 2021 with NHTSA, citing its decision to close its self-driving venture Argo AI in 2022. Tesla tentatively plans to begin offering rides on its self-driving robotaxis to the public on June 22, CEO Elon Musk said this week, but those vehicles have required human controls. (Reporting by David Shepardson; Editing by Chizu Nomiyama )
Zawya
20 minutes ago
- Zawya
Soybeans steady as oil rally offsets biofuel worries
BEIJING/PARIS - Chicago soybeans ticked up on Friday on the back of a jump in crude oil prices after Israel conducted strikes on Iran, though the oilseed market remained capped by uncertainty over U.S. biofuel targets and expectations of abundant global supply. Wheat edged higher to recover from an earlier four-week low, while corn eased to move back towards a six-month low from last week. Favourable crop prospects continued to hang over grain markets, with relatively benign weather in the U.S. Midwest and the onset of wheat harvesting in the Northern Hemisphere. The most-active soybean contract on the Chicago Board of Trade (CBOT) was up 0.2% at $10.44-3/4 per bushel, rebounding from a one-week low on Thursday. CBOT soyoil added 1.3%. Oil prices jumped nearly 9%, hitting their highest in months after Israel said it struck nuclear and military sites in Iran, dramatically escalating tensions in the Middle East and raising worries about disrupted oil supplies. "Rising crude oil prices lifted soyoil prices by making biodiesel more attractive, boosting demand for soyoil as a key biofuel ingredient," said Johnny Xiang, founder of Beijing-based AgRadar Consulting. That brought relief for the soybean complex after renewed concern on Thursday about U.S. biofuel policy. The U.S. Environmental Protection Agency (EPA) on Friday is expected to propose lower than-anticipated biofuel blending mandates, four sources told Reuters. ADM, a key U.S. soybean crusher and biofuel producer, cut bids for soybeans this week ahead of the EPA announcement. CBOT corn shed 0.7% to $4.35-1/2 a bushel. The market shrugged off a tighter stocks forecast for U.S. corn in a monthly U.S. Department of Agriculture report on Thursday, which was broadly expected following brisk recent exports. Supply pressure has built in corn and soybeans amid favourable growing weather in the U.S. Midwest and as Brazil begins harvesting what is expected to be a bumper second corn crop following a record soybean harvest. CBOT wheat was up 0.8% at $5.30-1/2 a bushel. The wheat market is facing seasonal harvest pressure in the Northern Hemisphere, where large crops are anticipated in the United States, Europe and Russia, despite mixed weather in recent months. "The groundwork for higher prices is there but the time frame is months rather than weeks, and before that can happen, we have to go through North Hemisphere harvest pressure," said Ole Houe, head of advisory services at IKON Commodities in Sydney. Prices at 1051 GMT Last Change Pct Move CBOT wheat 530.50 4.00 0.76 CBOT corn 435.50 -3.00 -0.68 CBOT soy 1044.75 2.50 0.24 Paris wheat 200.25 1.50 0.75 Paris maize 186.75 1.00 0.54 Paris rapeseed 489.00 6.75 1.40 WTI crude oil 73.83 5.79 8.51 Euro/dlr 1.15 -0.01 -0.75 Most active contracts - Wheat, corn and soy US cents/bushel, Paris futures in euros per metric ton.
Zawya
21 minutes ago
- Zawya
US stock futures fall as Israel's attack on Iran hurts risk appetite
U.S. stock index futures dropped on Friday after Israel's military strike on Iran's nuclear facilities escalated tensions in the oil-rich Middle East and battered risk sentiment across global markets. Israel has warned that the widescale strikes were the start of a prolonged operation to prevent Tehran from building an atomic weapon. Iran has promised a harsh response. An escalation in the conflict can "drag the U.S. into it, in which case, we would expect that global oil and gas supply will be disrupted for longer," analysts at Panmure Liberum said in a note. Oil prices surged nearly 9% and U.S. energy stocks rose in tandem, with Chevron and Exxon advancing 3.1% and 3.5% in premarket trading. Washington said it had no part in the operation, but President Donald Trump suggested Iran had brought the attack on itself by resisting U.S. demands to restrict its nuclear programme. Officials from both countries were due to meet in Oman on Sunday for a planned sixth round of nuclear talks. Trump also urged Iran to make a deal, saying "the next already planned attacks" will be "even more brutal". At 07:06 a.m. ET, Dow E-minis were down 430 points, or 1%, S&P 500 E-minis were down 55.25 points, or 0.91%, and Nasdaq 100 E-minis were down 245 points, or 1.12%. A 1.5% slump in Russell futures pointed to sharp declines for domestically focused stocks, while the Cboe Volatility Index, known as Wall Street's "fear gauge", rose to its highest in three weeks earlier in the session. Airline stocks dipped as the surge in crude prices raised concerns about higher fuel costs. Delta Air Lines was down 3.8%, United Airlines dropped 4.7%, Southwest Airlines lost 2.5% and American Airlines declined 3.9%. Defense stocks rose, with Lockheed Martin up 4.2%, RTX Corporation up 5.6%, Northrop Grumman up 4.6% and L3harris Technologies up 4.9%. U.S.-listed shares of gold miners also rose, after bullion prices hit a near two-month high with investors rushing to safe-haven assets. Newmont gained 1.1%, Harmony Gold was up 1.2% and AngloGold Ashanti rose 1.5%. The S&P 500 still remains just 1.8% below its record high reached earlier this year, following stellar monthly gains in May driven by upbeat corporate earnings and a softening in Trump's trade stance. The tech-heavy Nasdaq is about 2.8% off its record closing high reached in December last year. A tame consumer price report on Wednesday, softer-than-expected producer price data and largely unchanged initial jobless claims on Thursday helped reduce investor jitters around tariff-driven price pressures. However, policymakers are widely expected to keep rates unchanged next week. A preliminary reading of consumer sentiment for June, measured by the University of Michigan Surveys of Consumers, is due at 10:00 a.m. ET. Among other movers, Adobe fell 3.4% despite the Photoshop maker raising its full-year results forecast. (Reporting by Kanchana Chakravarty and Sukriti Gupta in Bengaluru; Editing by Devika Syamnath)
