Milestone Episode: Lowest Inflation Rise Since November 2020 | Episode 150 | 06-28-24

In the 150th milestone episode of "Markets with Megan," we delve into some critical economic indicators that are currently shaping the Federal Reserve's approach to interest rates. Specifically, we discuss the unexpected slowdown in core PCE inflation, labor market trends, and what these mean for future rate policies. This episode is particularly significant as it not only reflects on how far the podcast has come but also offers a nuanced understanding of recent economic data.

One of the most intriguing topics covered is the latest reading on core PCE inflation, which showed a mere 0.08% rise. This is the lowest month-over-month increase since November 2020. The core PCE, or Personal Consumption Expenditures Price Index, is a key inflation indicator closely monitored by the Federal Reserve. A slowdown in core PCE inflation is generally seen as positive news because it suggests that inflationary pressures may be easing, giving the Federal Reserve some breathing room. This figure is even more striking when compared to the January reading, which showed a much higher increase of 0.5%. The significant drop suggests that the measures taken by the Federal Reserve to control inflation are beginning to bear fruit.

It's the 150th episode of Markets with Megan. I just want to thank everybody who's tuned in and listened to our regular economic updates and talking about the markets. Again, if you have any questions or comments on how we can improve the podcast, please feel free to reach out to podcasts at verdence. com. But let's dig into what we got this morning, which was the Fed's preferred inflation indicator, and that is core PCE. What we saw this morning was good news. Inflation was up 0.1% and that's what the expectation was for the inflation reading. But when you actually go down two decimal places, it's 0.08, which is the lowest month-over-month reading we've gotten for core PCE since November of 2020. So this is definitely good news for the Federal Reserve. This gives them a little bit of breathing room here. We came all the way from being up this year in January of being up five-tenths of a percent on a month-over-month basis. So getting down to this almost unchanged on a month-over-month basis is what the Fed wants to see Now. On a year-over-year basis, inflation is still rising 2.6%. It is a little bit better than last month's year-over-year reading, which was 2.8%. So we're getting closer to the Fed's 2% target.

We still think September, while the odds of a rate cut in September have increased a lot with this data. We still think it's a little early to say September. You can remember that they have a dual mandate. It's inflation has to get down to their 2% target and they've made it clear they don't have to wait until that's exactly hit 2%. But they also have to have maximum employment and we're still seeing a labor market that's holding in there pretty well. We've seen some modest increase in the unemployment rate, but not anything where the Fed can say, okay, we're all as good, we can go ahead and cut interest rates.

We still think this is an end of the year story for interest rate cuts, but we're watching the data, just like the Federal Reserve, and we'll continue to monitor what's going on from not just the personal spending but also manufacturing, some of these things that have been under pressure to see if a September rate cut is more likely. That's all we have today in this week. We'll be back next week with a bunch of more economic data. Remember, it's a jobs week next week as well. It's also a shortened holiday week, but we will be back with some economic data for you. If you have any questions or comments, you know where to reach us. Thank you.