White House backs lower U.S. rates after June inflation slowdown
A sharper-than-expected slowdown in U.S. consumer prices is strengthening the White House case for lower borrowing costs. Kevin Hassett says the latest inflation data leave little justification for a rate increase and signal possible pressure on the Federal Reserve to move in the opposite direction.
Highlights
- The latest consumer price index showed a seasonally adjusted 0.4% decline in June, dropping annual U.S. inflation to 3.5%, the lowest in over six years.
- National Economic Council Director Kevin Hassett indicated the White House supports lower interest rates following the weak inflation data and expects Fed Chair Kevin Warsh to guide this direction.
- Hassett's remarks echo President Trump's push for rapid Fed rate cuts to boost economic growth, attributing broad disinflationary trends to administration policies beyond lower oil prices.
Inflation data strengthen White House rate stance
As reported by CNBC, National Economic Council Director Kevin Hassett says there is no case for raising interest rates after what he calls an "amazing" set of recent U.S. economic data, including the latest consumer price index reading.Speaking on CNBC's "Squawk Box" on Wednesday, Hassett says the Federal Reserve is likely to be "thinking the other way" if current trends continue, pointing instead toward lower rates. He also says the White House expects Fed Chair Kevin Warsh, President Donald Trump's appointee who began the role in late May, to help steer the committee toward what he describes as the right decision.
The latest consumer price index report shows prices falling a seasonally adjusted 0.4% in June, pushing the annual inflation rate down to 3.5%. The reading comes in below Dow Jones economists' expectations and marks the largest decline in consumer prices in more than six years, based on Bureau of Labor Statistics data.
Pressure builds around Fed policy direction
Hassett's comments align with Trump's repeated calls for the U.S. central bank to cut rates quickly in order to support economic growth and reduce borrowing costs across the economy.Hassett describes the June inflation report as one of the best he has seen in his career and credits Trump's policies for the shift. He adds that the decline is not solely tied to lower oil prices linked to developments in the U.S. war against Iran, suggesting broader disinflationary forces are also at work.
In our earlier article on the June U.S. CPI slowdown, we explained that the cooler inflation reading led markets to scale back expectations for a near-term Federal Reserve rate hike. We also noted that Fed officials welcomed the progress but still wanted several more months of supportive data, as price pressures can remain uneven across categories such as energy.
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