(PatriotWise.com) — On Tuesday, both Nasdaq and the S&P 500 reached their highest closings in 14 months, Reuters reported.
Stocks rose after the Labor Department released data showing that the consumer price index rose 0.1 percent in May, with core inflation remaining unchanged at 0.4 percent.
Headline inflation increased year-on-year by 4 percent due to declines in the cost of energy, including gasoline and electricity, marking the lowest inflation rate in more than two years.
After its meeting on Wednesday, the Federal Reserve said it will keep its key interest rate at about 5 percent, marking the first time in over a year that the Fed kept the rate steady, NBC News reported.
With inflation finally easing, the Federal Reserve opted to keep inflation steady to allow time to assess whether interest rates have already been raised enough to cool inflation and bring down prices.
However, the Fed also indicated that interest rates could still increase if inflation remains persistent or if “risks emerge” that may impede the Fed’s goal of reaching a 2 percent rate of inflation, according to a statement from the Fed’s Open Market Committee.
The central bank also lowered its projected unemployment from 4.5 percent down to 4.1 percent, indicating that the Fed believes that interest rates can continue to increase without causing unemployment to spike. Currently, unemployment stands at 3.7 percent.
From March 2022 until May of this year, the Open Market Committee has raised interest rates ten consecutive times amid rising inflation.
The economic impact of the Fed’s interest rate hikes has been substantial, increasing lending rates across the board, from credit cards to corporate lending, hitting their highest levels in decades.
The annual inflation rate peaked in June 2022, topping 9 percent. But even at 4 percent, inflation is still much higher than the Federal Reserve’s 2 percent target.
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