What a Better-Than-Expected CPI Number Means for Stocks

|June 12, 2024
The logo of the central bank of the United States, The Fed, With chairman Jerome powell in the background.

No one envies Jay Powell.

On Monday, the poor fellow was the recipient of not one but two single-spaced letters from Congress, urging the Fed Chief to cut interest rates.

“This sustained period of high interest rates is already slowing the economy and is failing to address the remaining key drivers of inflation,” congressional members wrote. “Furthermore, the European Central Bank (ECB), which like the Fed has a mandate to steer inflation towards a target of 2%, cut interest rates for the first time in five years. It’s time for the Fed to do the same.”

That may sting. (No one likes being told how to do their job.) But it gets worse…

When asked if he would fire Mr. Powell if given the chance, Former President Donald Trump recently told reporters, “Well, I know a lot about firing people…”

He later added, “With me, interest rates are coming down.”


We already covered some of the ways sky-high rates are hurting American consumers right now.

So, we can imagine the head of the Federal Reserve breathed a sigh of release this morning when he read the news…

Yahoo Headline

(Source: Yahoo)

CPI numbers for May show that inflation rates are slowing for another consecutive month.

Analysts expected core CPI to increase by 3.5% last month… but it came in just under, at 3.4%. Markets quickly roared their approval.

It’s the little things…

Just one more data point fueling investors’ expectation that rates will start to come down.

And it’s more proof of what Shah noted in his Monday Takeaways… that this morning’s CPI report – good or bad – would have an outsized impact on stocks.

In the days leading up to the report, the S&P has been relatively flat. But just look at that big spike when markets opened this morning…

S&P 500

Investors bet big on the idea that we are about to see our first rate cut since March 2020.

And when Jay Powell stepped to the mic this afternoon, he fanned those flames, acknowledging “modest further progress” in the fight against inflation.

He then signaled that Americans would likely see a single cut before the end of 2024.

Of course, in the wake of this all, a nagging question remains.

It’s the same question investors – and consumers – have been asking for the past 50 months…

When, exactly, will rates start to come down?

Only Mr. Powell and his team have even the vaguest inkling. And, unfortunately, they learned a long time ago that markets will take off like a shot on even the most tepid news.

In short: Rates will come down… when they come down. Maybe September? But let’s not get ahead of ourselves.

For now, the most unenviable man in finance will just have to put up with all the backseat driving and finger-wagging that comes his way.

It’s all part and parcel of life as a professional rate wrangler.

Alex Moschina
Alex Moschina

Alex Moschina is the associate publisher of Manward Press. A gifted writer, editor and financial researcher, Alex’s career in publishing began more than a decade ago when he worked at one of the world’s leading providers of academic research and reference materials. Alex first cut his teeth in the realm of investing when he joined the team at White Cap Research in 2010. There he was charged with covering emerging market trends and investment opportunities. A stint as senior managing editor and editorial director at the prestigious Oxford Club followed. A frequent speaker at conferences and events, Alex has led educational workshops across the U.S. and Canada.