Key Fed Inflation Rate Revised Lower As GDP Growth Slides

Key Fed Inflation Rate Revised Lower As GDP Growth Slides

The key Federal Reserve inflation rate was revised lower for the first quarter, while the U.S. economy slowed more than expected, according to the government’s second estimate of GDP growth. Meanwhile, initial jobless claims edged higher. After the data, S&P 500 futures pared overnight losses.




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This story is being updated with more data and analysis.

Q1 GDP

GDP grew at a revised 1.3% annual rate in the first quarter, down from the 1.6% initial estimate. That followed 4.9% growth in Q3 and 3.4% growth in Q4. Wall Street had expected a slight downward revision to 1.5%, following the April retail sales report, which included cuts to growth in Q1.

Core PCE Price Index

The Fed’s primary inflation rate, the core PCE price index, rose at a 3.6% annual rate in Q1, down from 3.7% in the initial report on April 25. The core PCE price index rose at a 2% rate in Q4.

Initial Jobless Claims

New claims for jobless benefits rose to 219,000 in the week through May 25 from a revised 216,000 the prior week.

Fed Rate-Cut Odds

Ahead of Q1 GDP revisions, markets were pricing in 49% odds that the first Fed rate cut of the cycle will come by the Sept. 18 meeting. Markets saw 61% odds that the Fed will either limit rate cuts to just one quarter-point or hold rates steady in 2024.

Stocks came under pressure as hawkish Fed commentary helped push up market interest rates. However, the Fed’s anecdotal Beige Book report on economic conditions across the country showed modest or slight growth in most parts of the country.

S&P 500

S&P 500 futures slipped 0.2% following the early data releases. Stocks fell overnight, weighed down by disappointing results from Salesforce (CRM) that were attributed to macro headwinds.

On Wednesday, the S&P 500 lost 0.7%, closing 1% below its May 21 record closing high.

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