The Consumer Price Index (CPI) data released on June 10th showed U.S. inflation remains stubbornly high. This reading of 8.6% Year over Year (YOY) was only slightly more than expected, and only slightly above the prior month’s YOY figure. Nevertheless, the increase raised concerns about how long inflation will remain elevated, and to what degree the responses required to tame it increase the odds of a recession.
In response to the reported CPI, the Federal Reserve Bank (Fed) announced on Wednesday that the short-term target for the federal funds rate increased by 0.75% to a range of 1.50%-1.75%. This change was modestly more aggressive than a previously anticipated 0.50% increase. We believe the Fed’s dual mandate of achieving price stability and maximum sustainable employment supports recent action and messaging that its future actions will be data dependent.
While inflation remains at elevated levels, and may be plateauing, our current investment outlook remains based on a long-term approach to investing. We continue to closely monitor the impacts of this most recent move, along with the potential effects of the upcoming July Fed meeting, when we now anticipate another 0.75% rate increase for the federal funds target rate.
Along with heightened geopolitical risk, the current economic environment, characterized by tight labor markets, rising interest rates, and higher inflation, has contributed to jarringly volatile stock (and bond) market movements. Know that we are closely monitoring the markets, economic data, company performance and geopolitical issues and the potential impact on your portfolio.
This timely but brief note will be followed by a more fulsome analysis in our upcoming Monthly Outlook. Until then, we invite you to reach out to us at 212.492.7000 with any questions or comments.