We’re on track for a soft landing
Brown and Irwin 24 (Courtenay Brown is an economics reporter at Axios. She covers the global economy, central banks, financial markets and macroeconomic trends. Neil Irwin is chief economic correspondent of Axios. He reports on and analyzes the U.S. and global economies, the Federal Reserve, economic policy, financial markets, and how they all intersect. “Cooling inflation ignites hope of rate cuts” 6/12/2024. Accessed 6/18/2024. https://www.axios.com/2024/06/12/cpi-report-inflation-cooling) wtk
It's starting to feel a little bit like late 2023: For the second straight month, the Consumer Price Index was cooler than expected — a sign that inflation might be back on a downward path.
Why it matters: The first few months of the year stoked fears that price pressures were reaccelerating. So far, the second quarter appears much different — with a soft landing path for the economy looking like a reality.
That could shift the tenor of Wednesday's Federal Open Market Committee meeting and make officials more comfortable penciling in two rate cuts this year in their projections. The first rate cut could be in September, if that scenario comes true.
Stocks and bonds were both rallying Wednesday morning upon the news.
What they're saying: "Inflation's return to the Fed's target took two steps forward in May after one step back in the opening months of 2024," Comerica's Bill Adams wrote in a report.
By the numbers: The CPI was unchanged for the month of May after rising 0.3% in April. The core measure, which excludes food and energy prices, rose 0.2% — the slowest monthly pace since August 2021.
Year-over-year inflation edged down as well, to 3.4% from 3.5%.
Core CPI is up an annualized 3.3% over the past three months, the lowest since October.
The intrigue: Some categories where price increases were feared to be sticky showed the opposite in May.