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US stocks hover near all-time highs as Powell boosts expectations for rate cuts

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US stocks hover near all-time highs as Powell boosts expectations for rate cuts

Investors are eagerly awaiting the release of June’s Consumer Price Index (CPI), a crucial data point that will influence future Federal Reserve interest rate decisions. The inflation report is expected to show a slight deceleration in headline inflation to 3.1% from May’s 3.3% rise, marking the smallest annual increase since January. Energy prices are contributing to downward pressure on CPI, with consumer prices expected to have risen by 0.1% over the prior month.

On a “core” basis, which excludes food and gas costs, prices in June are expected to have risen by 3.4% year-over-year and 0.2% month-over-month, consistent with May’s figures. Federal Reserve economists view this projected CPI report as a confidence booster, following positive results from May. The data arrives amidst a central bank environment focused on cooling job market growth and potential rate cuts to stimulate economic activity.

In a semiannual policy update, Federal Reserve Chair Jay Powell emphasized the need for more “good data” to ensure inflation aligns with the 2% target. Despite stubbornly high core inflation, recent fluctuations in non-housing services and motor vehicle insurance costs may indicate a volatile path ahead for price stabilization. While services inflation is expected to moderate over time, sustained deflation remains unlikely, highlighting the complex challenges facing the Federal Reserve in navigating economic trends during uncertain times.

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