US CPI is still above target

in #economy4 months ago

US CPI for the year ending June came in at 3%. down from 3.3% for May. Here is the chart:


source

The markets are excited because they think this means an interest rate cut by September.

But the Fed's target for inflation is 2%, and there is no sign they'll achieve it by September. Indeed inflation has been in the 3% to 3.5% range for nine months. Far from cutting rates, the Fed might need to hike to get inflation down to 2% (though they won't hike till after the election).

The alternative is for them to accept inflation at around 3% - but that requires them to hold rates where they are. Any cut will send inflation higher.

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