The stock market has surprised many investors so far in 2023. After climbing about 20% from their October lows, the two US stock market benchmark indices, the S&P 500 and Nasdaq 100, are in the bull market zone. In June, the market will be focused on the CPI inflation data as well as the highly anticipated Fed policy meeting.
May 2023 US CPI data are scheduled to be released on June 13, 2023, at 8:30 A.M. Eastern Time. US Fed rate hike action comes calling in Mid June. The two-day FOMC meeting takes place on June 13-14 followed by a press conference by Federal Reserve Chief Powell. The decision on rate hike by the Fed will be announced on June 14. Further, the Fed will also release the Economic Projections on June 14.
What the Fed will decide to do on June 13–14 is not crystal clear to the market. Up until the beginning of the blackout period, many Fed officials will be speaking. Investors will closely monitor Fed officials’ comments on inflation, the economy, and interest rates to glean guidance for the next moves.
The market anticipates that the May US CPI figures will indicate that neither inflation nor core inflation is decreasing quickly enough for the Fed to cease its inflation-fighting efforts. Annual CPI expectations range from 4.6% to 4.8%, compared to a 4.9% annual rate in April. Core inflation, which excludes food and energy costs, is expected to be at 5.4%-5.6% in May, down from 5.5% in April.
The current preferred narrative is that the Fed has significantly hiked interest rates, and stricter lending restrictions will act as a brake, therefore it may be preferable to leave rates steady at the June Federal Open Market Committee (FOMC) meeting and re-evaluate the situation in July. If the labour market remains strong and inflation remains substantially above goal, the Fed may raise interest rates again.
Meanwhile, the US debt ceiling crisis is out of the way and investors are wary of AI-stocks led stock market rally to continue or not. The economic data released over the last month is not showing signs of a recession anytime soon. The US Fed is expected to pause rate hikes in June. However, a negative surprise on US CPI data for May to be released in June may play a spoilsport for the market.
Data released on Friday revealed that job growth in the United States accelerated in May, despite a rise in the unemployment rate, indicating that labour market conditions were improving, bolstering investors’ appetite for stocks amid hopes that the Federal Reserve will be able to reduce inflation without harming GDP. Investors will also be looking forward to fresh economic data this week, which includes May PMI data as well as April factory and durable goods orders.