The Fed's outlook for inflation and jobs shows the bind it's in — plus, Amazon's robotaxi move
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Markets and Fed: Stocks fluctuated between modest gains and losses Wednesday afternoon after the Federal Reserve opted to keep interest rates unchanged, in line with expectations. Investors were also chewing over the central bank's updated economic projections, which are released on a quarterly basis. The central bank now sees median core PCE inflation coming at 3.1% in 2025, up from the 2.8% rate previously forecasted in March. Modest upward revisions to inflation expectations were also seen for 2026 and 2027, though, of course, it's quite difficult to forecast that far into the future. The Fed committee also now sees median unemployment in 2025 coming in at 4.5%, up from the prior 4.4% forecast. Similarly to the inflation outlook, the Fed's 2026 and 2027 unemployment forecasts were revised up slightly. As a result, the Fed now sees real GDP — meaning adjusted for inflation — coming in below prior expectations. 2025 is now expected to see real GDP growth of 1.4%, down from 1.7%. Meanwhile, 2026 growth is expected to come in at 1.6%, down from 1.8%. However, the growth estimate for 2027 was left unchanged at 1.8%. These revisions underscore the bind that the Fed finds itself in during President Donald Trump's tariff war. The Fed's dual mandate is to ensure price stability and low unemployment. When faced with higher inflation, the Fed usually seeks to tame it using rate hikes. When faced with increasing unemployment, the Fed usually turns to rate cuts to stimulate the economy. There's tension now on both sides of that mandate. At his post-meeting press conference, Fed Chair Jerome Powell reiterated that the central bank is "well positioned to wait" before adjusting policy any further. On tariffs, specifically, Powell said: ""It takes some time for tariffs to work their way through the chain of distribution to the end consumer." "Because the economy is still solid, we can take the time to actually see what's going to happen," Powell said. "We'll make smarter and better decisions" if we wait a few months to get more data on tariffs, he said. Crude checkup: Oil prices were mostly flat Wednesday after Trump said Iran wants to negotiate following six days of Israeli airstrikes. "They want to negotiate," Trump told reporters Wednesday morning, less than 24 hours after he had threatened Iran's supreme leader, Ayatollah Ali Khamenei. "They even suggested that they come to the White House. That's courageous. It's like not easy for them to do." Stock investors have been closely following the way that oil is reacting to Israel-Iran headlines, given the potential for the conflict in the oil-rich region to disrupt supply and dent global economic growth. Israel's surprise attack on Iran's military nuclear infrastructure Friday led to the initial jump in oil prices. Friday's upswing was the biggest intraday move for the crude futures contract since 2022. Prices have seesawed in subsequent days, but remain trading near five month highs. Driverless news: Autonomous vehicles are back in the spotlight Wednesday. Club name Amazon is ramping up production of its Zoox robotaxis ahead of the launch of public rides in Las Vegas later this year, and Alphabet's Waymo announced that it is looking enter New York City, albeit with a human behind the wheel to start. The news is just the latest indication of how fast the adoption of robotics is playing out — after all, that's more or less what an autonomous vehicle is. For Amazon specifically, it speaks to the opportunity AI presents. We just heard from CEO Andy Jassy on this on Tuesday. In a note published on the company's website, Jassy wrote that in the coming years, "we expect that [artificial intelligence] will reduce our total corporate workforce as we get efficiency gains from using AI extensively across the company." However, reading the tea leaves, we think it pretty clear that AI is going to impact far more than the corporate headquarters. Earlier this month, we learned that the company was looking into AI-powered humanoid robots to make deliveries. In total, analysts at Morgan Stanley estimate that the overall Amazon is looking to automate roughly $200 billion in logistics costs, or about 35% of its online retail revenue. Between humanoid robots and self-driving cars, there is a massive opportunity at play for Amazon to not only open up new revenue streams via a robotaxi service, but also reduce it's massively existing cost structure, boosting profits in the process. Of all the major tech players in the AI race, Amazon may prove to be the greatest beneficiary. Of course, its profit-engine Amazon Web Services is benefiting from software developer demand for cloud resources as AWS offers up multiple large language models for them to leverage. But given its massive logistics network — something the other American tech giants don't really have —it likely has the biggest opportunity of all of them when it comes to margin expansion. Up next: The market will be closed on Thursday in observance of Juneteenth. On Friday, investors will return to a basket of corporate earnings. Accenture , Kroger and Darden Restaurants will all report quarterly results before the opening bell. Updates from supermarket giant Kroger and Olive Garden owner Darden, in particular, could offer fresh insights on the health of the U.S. consumer. On the economic data front, the Philadelphia Fed manufacturing survey will be released at 8:30 a.m. ET. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
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Oil falls as investors weigh chance of US intervention in Iran-Israel conflict
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CNBC
43 minutes ago
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CNBC Daily Open: Stagflation on the Fed's mind
At U.S. Federal Reserve Chair Jerome Powell's post-meeting press conference, the topic of tariffs — specifically, their impact on prices — was a recurring one. "Everyone that I know is forecasting a meaningful increase in inflation in coming months from tariffs because someone has to pay for the tariffs," Powell said. "And some of it will fall on the end consumer." Granted, recent economic data has been upbeat, suggesting the U.S. economy has been able to — and could still — escape from tariffs mostly unscathed. In May, a better-than-expected 139,000 jobs were added and the unemployment rate was unchanged at 4.2%. Consumer sentiment in early June was much more optimistic than forecast, according to a University of Michigan survey. And, most crucially, inflation in May — based on the consumer price index — ticked up just 0.1% for the month, lower than estimated. But that string of positive data might have to thank the slow process by which tariffs move through the economy. "It takes some time for tariffs to work their way through the chain of distribution to the end consumer. A good example of that would be goods being sold at retailers today may have been imported several months ago before tariffs were imposed. So we're beginning to see some effects, and we do expect to see more of them over the coming months," Powell said. And even though Fed officials, at present, "don't see signs" of the U.S. economy weakening, Powell acknowledged growth will slow "eventually." In other words, stagflation — the toxic mix of higher prices and slower growth — could be a possibility in the months ahead. The song "I Got Summer on My Mind" went viral in 2022. "I Got Stagflation on My Mind" could be the Fed's — and market watchers' — earworm this summer. U.S. central bank holds rates, sees two cutsThe U.S. Federal Reserve on Wednesday kept interest rates in a range between 4.25%-4.5%, where it has been since December. Along with the rate decision, the committee indicated, through its closely watched "dot plot," that two cuts by the end of 2025 are still on the table. Earlier Wednesday, President Donald Trump said the fed funds rate should be at least 2 percentage points lower, and again slammed Chair Jerome Powell, calling him "stupid." Fed hikes inflation and lowers growth forecastsInflation in the U.S., measured by the personal consumption expenditures price index, will rise beyond 3% in 2025, according to an updated Fed forecast. The central bank had in March expected the PCE to hit 2.8%. The PCE came in at just 2.1% in April. The Fed also sees economic growth slowing to 1.4% this year, down from an earlier estimate of 1.7%. In combination, both forecasts point to early signs of stagflation. Markets and oil prices were flat in U.S.U.S. stocks hovered around the flatline Wednesday. The S&P 500 slipped 0.03%, the Dow Jones Industrial Average closed 0.1% down, but the Nasdaq Composite inched up 0.13%. Oil prices, likewise, were little changed. Europe's regional Stoxx 600 index lost 0.36%. The FTSE 100, however, ticked up 0.11% as data showed U.K. annual inflation coming in at an expected 3.4% in May. Trump says he hasn't decided on Iran strikesFor the second time in two days, Trump on Wednesday met his national security team in the White House amid the Israel-Iran conflict. The closed-door gathering took place as Trump insisted he had not yet decided whether to order a U.S. strike on Iran. The same day, U.S. Ambassador to Israel Mike Huckabee said evacuation flights and cruise ship departures were being arranged for American citizens seeking to leave Israel. [PRO] 'Profound impact' on oil market: JPMorganThe current jump in oil prices because of the simmering conflict in the Middle East might not lead to a long-term price shock, according to historical data analyzed by JPMorgan. A regime change in Iran resulting from U.S. or Israeli military action, however, can have a "profound impact" on the global oil market, the bank said. These are the sticking points holding up a U.S.-EU trade deal The U.S. and European Union are running out of time to strike a deal on trade tariffs — and analysts say several key sticking points could make an agreement impossible. Negotiations have been slow since both the U.S. and EU temporarily cut duties on each other until July 9. If a deal is not agreed by then, full reciprocal import tariffs of 50% on EU goods, and the bloc's wide-spanning countermeasures are set to come into effect. "We're talking, but I don't feel that they're offering a fair deal yet," Trump told reporters Tuesday, further dashing hopes of an imminent agreement. So what's holding things up between the two sides, which had a relationship worth 1.68 trillion euros ($1.93 trillion) in 2024?
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Facing Colorado River crunch, Trump admin eyes SoCal groundwater
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The last time the board reviewed anything from Cadiz was in 2002, when it voted to reject the project, she said. But, amid high-stakes Colorado River negotiations, it might be hard for Metropolitan to say no to a request that could help ease the path to a deal for another state. Like this content? Consider signing up for POLITICO's California Climate newsletter.
