The US consumer confidence Friday’s survey showed a dip to a record low in June, but Americans saw a marginal improvement in inflation expectations, a rare silver lining for policy makers. Federal Reserve While evaluating how fast you should go up interest rates this year.
The University of Michigan She said the final reading of the consumer confidence index fell to 50.0 from 55.2 in May, due to persistently high inflation and growing fears of an economic slowdown. This number compares with the preliminary reading for June of 50.2.
Inflation expectations for one year from May were unchanged at 5.3%, but down from the preliminary reading for June of 5.4%.
Five-year inflation expectations rose to 3.1% from 3.0% in May, but are down from an initial 3.3% in June.
A weak initial reading from two weeks ago, along with other worrying inflation data on the same day, led the US central bank to switch to offering a larger-than-expected 75 basis point interest rate hike last week, amid concerns over the inflation outlook. It will start to become unrelated.
Since then, the Fed has indicated it will raise the benchmark overnight interest rate by 50 or 75 basis points at the next policy meeting in July, in an attempt to tame inflation more decisively, calling that fight “unconditional.”
Moderating inflation expectations – especially on the five-year horizon – have lowered Treasury yields that are more sensitive to Fed policy expectations.
The yield on the two-year bond fell 10 basis points in the moments after the University of Michigan data was released. It later traded at 3.04%, down from 3.02% on Thursday, but down 5 basis points from the day’s high.
Interest rate futures also reacted to the report, with contracts tied to the July policy meeting now reflecting an 83.4% chance of a rate hike of another 75 basis points, up from 93.3% on Thursday.
The data raised the possibility of the Federal Reserve cutting that pace to 50 basis points at its mid-September meeting.
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