• On June 14th, The Federal Reserve announced a pause in interest-rate increases as it assesses the effects
of its tightening efforts on the economy, holding the target federal funds rate at 5.0-5.25% while signaling
the likelihood of further rate hikes this year.
• The decision was unanimous and followed ten consecutive rate-hikes dating back 15 months to March
2022 as the central bank attempted to get spiraling inflation under control.
• May’s Consumer Price Index (CPI) report showed falling headline inflation numbers, with prices climbing
just 0.1% month-over-month and 4.0% year-over-year, its smallest annual increase in over two years.
Futures markets were forecasting a rate pause before the release of CPI data, but May’s numbers likely
reinforced the Fed’s decision.
• The Fed’s Summary of Economic Projections reveals that despite the pause, policymakers have pushed
their expectations of the terminal interest rate further out, with the median forecast projecting a 5.6%
federal funds rate by the end of 2023.
• Markets climbed on the news and largely shrugged off worries over future increases while fed futures
continue to project a rate-cut later this year. Market reactions signal that investors aren’t entirely convinced
of the Fed’s hawkish stance and that the Fed funds rate may have peaked. Officials have said they will
wait about six weeks to see the impact of policy moves and remain data-dependent in their decision making.
• The Consumer Price Index CPI) rose just 0.1% month-over-month in May and climbed 4.0% over the
previous 12 months, according to the latest release from the Bureau of Labor Statistics (BLS). May’s
increase was the slowest annual increase in inflation since May 2021.
• Excluding food and energy, inflation was up 0.4% on the month and 5.3% year-over-year. Core and
headline inflation numbers have steadily diverged, with core data remaining elevated. This is partially due
to falling energy prices, which saw a 3.6% decline in May, causing headline CPI to fall faster than core.
Shelter prices remained the largest contributor to price gains in May despite a gradual fall in home prices
over the past several months.
• Real wages also improved for the average worker as hourly wages adjusted for inflation rose 0.2% on the

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