Points
- The U.S. Federal Reserve on Wednesday kept interest rates in a range between 4.25%-4.5% and kept two cuts in 2025 on the table.
- Inflation in the U.S., measured by the personal consumption expenditures price index, will rise beyond 3% in 2025, according to an updated Fed forecast.
- U.S. stocks and oil prices were little changed Wednesday. Asia-Pacific markets fell Thursday.
- Israeli President Isaac Herzog told CNBC’s Dan Murphy on Wednesday that a regime change in Iran was “not an official objective of ours.”
- U.S President Donald Trump insisted he had not yet decided whether to order a U.S. strike on Iran.
- Institutional investors are growing more enthusiastic about emerging markets, according to Bank of America’s Fund Manager Survey.
At U.S. Federal Reserve Chair Jerome Powell’s post-meeting press conference, the topic of tariffs — specifically, their impact on prices — was a recurring one.
“Everyone that I know is forecasting a meaningful increase in inflation in coming months from tariffs because someone has to pay for the tariffs,” Powell said. “And some of it will fall on the end consumer.”
Granted, recent economic data has been upbeat, suggesting the U.S. economy has been able to — and could still — escape from tariffs mostly unscathed.
In May, a better-than-expected 139,000 jobs were added and the unemployment rate was unchanged at 4.2%. Consumer sentiment in early June was much more optimistic than forecast, according to a University of Michigan survey. And, most crucially, inflation in May — based on the consumer price index — ticked up just 0.1% for the month, lower than estimated.
But that string of positive data might have to thank the slow process by which tariffs move through the economy.
“It takes some time for tariffs to work their way through the chain of distribution to the end consumer. A good example of that would be goods being sold at retailers today may have been imported several months ago before tariffs were imposed. So we’re beginning to see some effects, and we do expect to see more of them over the coming months,” Powell said.
And even though Fed officials, at present, “don’t see signs” of the U.S. economy weakening, Powell acknowledged growth will slow “eventually.” In other words, stagflation — the toxic mix of higher prices and slower growth — could be a possibility in the months ahead.
The song “I Got Summer on My Mind” went viral in 2022. “I Got Stagflation on My Mind” could be the Fed’s — and market watchers’ — earworm this summer.
Source: https://www.cnbc.com/2025/06/19/cnbc-daily-open-us-economic-slowdown-still-in-the-cards-fed-says.html