Wednesday's Scoop: Steady 🌞

Hey friend - hope you’re treating your summer interns well.

Here’s what you need to know today to inform your work, spending, and investments:

1. Policymakers think the economy is still doing well.

2. The Fed isn’t ready to make borrowing cheaper anytime soon.

3. The cost of living stopped rising last month.

Unemployment Rate: 4.0%
^{Still near the lowest rate in 50+ years}

Policymakers think the economy is still doing pretty well. The Federal Reserve released updated economic projections indicating solid growth but higher unemployment than estimated in March, with real Gross Domestic Product (GDP) growth of 2.1% for 2024 and an unemployment rate of 4.0%. The Fed sees unemployment rising to 4.2% next year. Those projections still demonstrate a lot of confidence in the economy, given that it’s not far from record-low unemployment. Chairman Powell reported resilient consumer spending across the country and insisted that hiring is normalizing from an unmanageable pace, not signaling a downturn.

Inflation Rate: +3.3% (YoY), +0% (MoM)
^{Policymakers aim for 2% YoY inflation. (May CPI)}

Living costs stopped rising last month in a brief break from continued inflation. The Bureau of Labor Statistics' Consumer Price Index (CPI) showed zero month-on-month change for May after increasing by 0.3% in April, driven mainly by falling energy costs and steady prices at the grocery store. When excluding volatile food and energy costs, the core CPI rose only 0.2%, the slowest inflation in months. There were promising signs everywhere. Prices for new vehicles, apparel, household furnishings, and other goods fell. Even car insurance, one of the most inflated categories in the past two years, got cheaper for the first time in years. Overall, things cost 3.3% more than they did last year.

Policymakers aren’t ready to make borrowing cheaper anytime soon. The Federal Reserve kept baseline interest rates unchanged at the June policy meeting. It indicated that the committee only expects to reduce interest rates by a quarter of a percent this year. Policymakers believe there has been modest progress in slowing the rising cost of living down to the Fed’s 2% annual inflation target, but the remaining progress will likely be slow. The committee expects to reduce interest rates more aggressively next year, bringing down the cost of borrowing for things like mortgages, auto loans, credit cards, and business loans.

The Market: ⬆️ +0.9%
S&P 500: 5,421.03
1Mo: +4% | 1Yr: +25% | 5Yr: +88%

The market soared to a new record high on Wednesday as investors celebrated a surprisingly good inflation report. Living costs didn't rise in May, up only 3.3% over the past year. The progress on inflation wasn't enough to make policymakers claim their mission accomplished. The Fed doesn't expect to ease its restrictive policies or make borrowing cheaper anytime soon.