Wall Street’s main indexes advanced this Wednesday after Federal Reserve Chair Jerome Powell said that inflationary pressures were likely easing. Federal Reserve Chair Jerome Powell reiterated remarks submitted to the Senate Banking Committee Tuesday, that recent inflation data have shown “modest further progress,” and that “more good data” would strengthen policymakers’ confidence that inflation was returning to their 2% target.
The Consumer Price Index (CPI) data will be released on July 11 and if the inflation figures are lower than expected, it could signal an immediate interest rate cut or suggest that the Federal Reserve will implement additional rate cuts in the near future. Market bets on a 25-basis-point rate cut from the Fed in September were at 74%, up from around 70% on Tuesday and 45% a month ago, according to CME’s FedWatch. Raymond James Chief Market Strategist Matthew Orton said in an interview with Reuters:
“There’s still three CPI reports that we’re slated to get between now and September, so it’s hard to say conclusively that he’s leaning towards September or if it’s going to be pushed off. My expectation for CPI is that it will continue to see the easing trend with respect to inflation. But I don’t think the decline we’re going to see for June is going to be as strong as what we saw in May.”
See Related: U.S. Central Bank May Need To Keep Interest Rates Higher For Longer. What To Expect In The Upcoming Days?
Central Bank And Inflation
Federal Reserve Chair Jerome Powell also said this Wednesday that the central bank is not just focused on inflation and that policymakers closely watch the situation in the U.S. labor market. He concluded that the U.S. is still on track for a so-called soft landing, where the Fed’s inflation target is met without a significant increase in the unemployment rate. This outcome seemed improbable when inflation reached a 40-year high in 2022.
The Nasdaq Composite rose 1% to 18,608.2 intraday, while the S&P 500 gained 0.7% to reach 5,614.8. The Dow Jones Industrial Average advanced 0.5%, climbing to 39,479.8 while it is important to mention that the technology and materials sectors led the gains, with financials being the only sector to decline. Following the progress of Wall Street’s main indexes seen in the first half of the year, investors are still optimistic about the prospect of another robust period ahead. This optimism is rooted in the anticipation that a decelerating economy will result in a gentle landing rather than a full-scale recession.
