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Fed Chair Powell Stresses Patience Despite Inflation Progress
At a recent central banking forum in Portugal, Federal Reserve Chair Jerome Powell highlighted the progress made in bringing inflation down towards the Fed’s 2% target. While acknowledging this achievement, Powell emphasized the importance of waiting for more evidence before considering rate cuts. He stated, “We want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy.”
Despite the Personal Consumption Expenditures (PCE) price index rising at a 2.6% 12-month pace in May, down from around 4% a year ago, the Fed does not expect inflation to reach its goal until 2026.
Market Adjustments to Fed’s Stance
Market expectations for rate cuts have shifted significantly in recent months. Current pricing suggests two quarter-point reductions in 2024, a decrease from previous expectations of six cuts. The Fed’s projections indicate only one cut this year, highlighting the disparity between market expectations and central bank guidance.
Strong Job Market Continues
The recent Job Openings and Labor Turnover Survey (JOLTS) by the Labor Department revealed an increase in job opportunities in May. With job openings surpassing forecasts at 8.14 million and a ratio of openings to unemployed workers at 1.2 to 1, the labor market remains tight and robust.
Impressive Sector and Stock Performance
The consumer discretionary sector showed significant gains, with a 1.17% increase led by Tesla’s strong performance. Tesla’s shares surged nearly 9% following better-than-expected second-quarter deliveries of 443,956 vehicles.
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