Mixed stocks as attention shifts to inflation data

Neel Kashkari, the president of the Minneapolis Fed, is the most recent Fed official to advocate for prolonged high interest rates.

Jennifer Schonberger from Yahoo Finance provides the following report:

On Tuesday, Kashkari didn’t completely dismiss the possibility of an interest rate rise, however, he suggested that it’s more probable for the central bank to keep rates stable for a lengthy period as it anticipates a decrease in inflation.

“Until we are confident that inflation is sustainably returning to our 2% target, we could remain in this position for as long as necessary,” he stated.

While maintaining rates at their current 23-year peak “for an extended period of time is a more likely outcome,” Kashkari emphasized that additional alternatives are available if inflation does not decrease.

“I am not excluding potential interest rate hikes from here,” he added.

On May 1, the Fed opted to retain its key interest rate between 5.25%-5.50% as it strives to bring inflation down to its 2% target.

Minutes from that gathering unveiled last week revealed that some policymakers expressed their readiness to raise rates if required.

“Several participants expressed willingness to tighten policy further should inflation risks materialize in such a way that it warranted such action,” as per the minutes.

Expectations for a rate reduction this year are diminishing. Investors have now reduced the likelihood of the first rate cut happening in September, with a 50% chance the Fed won’t lower rates that month. The chances of a cut in November stand at 46%.

The inflation figures for the first quarter were more robust than anticipated, but a reading in April released after the Fed’s previous meeting did indicate some reduction in pricing pressures.

This Friday, officials will receive a new reading from their preferred inflation measure, the Personal Consumption Expenditures index on a core basis, which excludes fluctuating food and energy costs.

Economists anticipate that April’s “core” PCE recorded an annual increase of 2.8%, unchanged from March’s rise. From the previous month, economists predict a “core” PCE growth of 0.2%, a decline from 0.3% the prior month.