June inflation rose at its highest rate since February as President Trump’s tariffs began to seep into the economy. The Dow Jones (DJIA) is trading slightly lower on the news but is just inches away from positive territory.
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During the month, the consumer price index (CPI) increased by 0.3% month-over-month (MoM) and 2.7% year-over-year (YoY). Both figures were in line with their respective estimates. In May, CPI rose by 0.1% MoM and 2.4% YoY.
Core CPI, which strips out volatile food and energy prices from the CPI, increased by 0.2% MoM and 2.9% YoY. Economists were expecting a monthly rise of 0.3% and a yearly rise of 2.9%.
July Rate Cut Odds Plummet on Accelerating CPI
With rising prices back in the spotlight, the odds of a July rate cut have been slashed as the Fed now needs to return inflation to its 2.0% target. Traders are pricing in a 2.6% chance for a 25 bps cut this month, down from 6.2% yesterday and 23.0% a month ago.
The Dow Jones is showing resiliency in light of the elevated probability of higher rates for longer. Lower interest rates spur economic growth, providing both companies and individuals with the opportunity to borrow money at lower costs. That results in increased spending and more hiring.
The Dow Jones ETF (DIA) is down by 0.05% at the time of writing.
