Fed Keeps Key Interest Rate Unchanged

The Federal Reserve announced that the target range for the federal funds rate would remain at 5.25%-5.50%, a decision that was widely expected. Based on projections for interest rates by the end of next year, it now appears that Fed officials anticipate making just one rate cut of 0.25% later this year, followed by four more cuts in 2025.

CPI was Unchanged in May

The Consumer Price Index was unchanged in May after increasing 0.3% in April. The index less food and energy rose 0.2% in May after rising 0.3% in April. Prices for shelter continued to climb in May, more than offsetting a decline in gasoline prices. Prices for energy fell 2.0%, while prices for food rose 0.1%. The CPI advanced 3.3% for the 12 months ended in May, a slower pace than the 3.4% advance for the 12 months ended in April. Prices less food and energy (core CPI) rose 3.4% for the year ended in May, down from 3.6% in April and the smallest 12-month increase since 2021.

Eye on the Week Ahead

Several areas of the economy are highlighted this week, starting with the May retail sales report. Inflationary pressures at the retail level were somewhat muted in April. The Federal Reserve report on industrial production for May is also coming out. Industrial production was unchanged in April, although manufacturing output slowed. Lastly, the Census Bureau report on housing starts for May and data on existing home sales will be released. The number of issued building permits declined in April, while housing starts advanced. Sales of existing homes declined in April, although the median price for existing homes rose to over $400,000.