- The Federal Reserve maintained the federal-funds target rate range at 5.00% - 5.25%
- The U.S. CPI rose at a 4.0% annual rate in May, the lowest reading since March 2021
- Retail sales rose 0.3% in May
Please join us for our July 2023 Gallagher Financial Markets Update webinar on Thursday, July 13th at 11:00 a.m. ET.
Top Three Market Headlines
Fed Pauses Rate Hikes: At its latest policy meeting held last week, the Federal Reserve decided to keep its interest rate benchmark, the federal-funds rate, at the current target range of 5.00% - 5.25%. This was the first time after 10 consecutive rate increases over the course of the past 15 months that the central bank did not raise rates. However, in an accompanying statement, the Fed implied that the decision to hold rates in the current range may be short-lived, as officials projected potentially raising rates two more times this year. Key determinants behind future moves will be trends in employment and inflation data.
CPI Report Shows Sticky Core Inflation: The U.S. Department of Labor reported last week that the Consumer Price Index (CPI) rose 0.1% in May and was up 4.0% from the prior year. The latter represented a deceleration from a 4.9% rate posted in April and was the lowest annual rate since March 2021. Food costs remained elevated, rising 6.7% versus the prior year, while shelter costs were 8.0% higher; on the other hand, energy cost pressures eased by a meaningful margin, falling 11.7% from the prior year. Excluding the volatile energy and food sectors, the so-called "core CPI" showed little progress in subsiding, rising 5.3% from the prior year, down only slightly from a 5.5% annual rate in April.
Retail Sales Edge Higher in May: Sales at U.S. retail and food service establishments rose 0.3% in May from the prior month, the U.S. Department of Commerce reported last week. Compared to the prior year, sales rose just 1.6%, weighed down in particular by a 21% decline at gas stations owing to lower gas prices. Excluding gas stations, total annual sales showed a better growth rate, at 4.0%. Consumers spent less on big ticket items versus the prior year, with sales of furniture declining 6.4% while electronics & appliances fell 5.0%. Services businesses, on the other hand, exhibited a rebound, with restaurant sales jumping 8.0% from last year.