The Federal Reserve now has increased chances to reduce interest rates by September because U.S. inflation data for May turned out lower than expected. Consumer prices increased 0.1% during May while annual inflation reached 2.4% which fell short of market predictions. The data triggered traders to increase the September rate cut probability to 68% from 57% within minutes of its release. The market now predicts a July rate cut but this scenario remains improbable.
The Federal Reserve will maintain its current policy rate between 4.25% and 4.50% during its upcoming meeting. The officials maintain a conservative stance because Trump’s tariffs present obstacles to achieving the Fed’s 2% inflation target. The near-term policy decision to maintain current interest rates depends on the continued strength of job market growth.
The 55% Chinese goods tariff implemented by President Trump through his trade deals creates additional market uncertainty. The current market assessment indicates that the Federal Reserve will implement economic support measures because of the ongoing trade battles.
