“Success if getting what you want. Happiness is wanting what you get.” — Dale Carnegie

1. Inflation rose at a 4% annual rate in May, the lowest in 2 years — The consumer price index, which measures changes in a multitude of goods and services, increased just 0.1% for the month, bringing the annual level down to 4%. That 12-month increase was the smallest since March 2021, when inflation was just beginning to rise to what would become the highest in 41 years. A 3.6% slide in energy prices helped keep the CPI gain in check for the month. Food prices rose just 0.2%.
However, a 0.6% increase in shelter prices was the biggest contributor to the increase for the all-items, or headline, CPI reading. Housing-related costs make up about one-third of the index’s weighting.
2. Fed Holds Rates Steady but Expects More Increases — Federal Reserve officials agreed to hold interest rates steady after 10 consecutive increases, but signaled they are leaning toward raising them next month if the economy and inflation don’t cool more. In a statement, the Fed said the decision to maintain the benchmark federal-funds rate in a range between 5% and 5.25%, a 16-year high, might be short-lived. “Holding the target range steady at this meeting allows the committee to assess additional information,” the committee said in the statement. Officials approved the rate decision unanimously.
3. European Central Bank Raises Rates, Signals More Hikes to Come — The European Central Bank nudged up interest rates by a quarter percentage point and indicated it will continue to push them higher, sending the euro surging higher. The ECB’s assertiveness, which took markets aback, stands in contrast to the Federal Reserve’s decision on Wednesday to keep interest rates steady. At a news conference, ECB President Christine Lagarde said officials are unhappy with the outlook for inflation and will continue to raise rates unless economic data change substantially. The ECB said in a statement it would increase its key deposit rate to 3.5%, the highest level in more than 20 years. That move, the bank’s eighth consecutive rate increase, was widely anticipated by investors. But in an unexpected hawkish twist, Lagarde strongly indicated it will raise rates again next month, and the bank sharply raised its forecasts for underlying inflation through 2025.
4. Retail sales rose 0.3% in May after a strong April gain — consumers spent a seasonally adjusted 0.3% more in May at retail stores, restaurants and online, following April’s strong 0.4% advance, the Commerce Department said Thursday. That growth reflected robust hiring and rising wages that pumped up incomes in recent months, further defying recession predictions in early 2023. Consumers spent more at grocery, furniture and electronics stores last month, Tuesday’s report showed. They also appeared to shrug off higher interest rates in May. Sales climbed at auto dealerships and home-improvement stores, places where customers often borrow to pay for big-ticket purchases.

The week ahead — Economic data from Econoday.com:

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