US stocks popped to fresh records Wednesday as investors digested a one-two punch: a cooler-than-expected reading on inflation, and the Federal Reserve holding interest rates steady but slashing projections for cuts this year.
The S&P 500 (^GSPC) notched a record close for the 28th time this year, rising about 0.9% and closing above 5,400. The tech-heavy Nasdaq Composite (^IXIC) rose about 1.5%, also adding to a record close from the prior day. The Dow Jones Industrial Average (^DJI) gave up 0.1%.
The Consumer Price Index (CPI) remained flat over the previous month and rose 3.3% over the prior year in May — a deceleration from April’s 0.3% month-over-month increase and 3.4% annual gain in prices. Both measures beat economist expectations. On a “core” basis, which strips out the more volatile costs of food and gas, prices in May climbed 0.2% over the prior month and 3.4% over last year — cooler than April’s data. Both measures also came in better than economist estimates.
Later in the day, the Fed held rates steady at multi-decade highs and projected just one rate cut this year — down from three in March. Policymakers also projected core inflation would end the year at 2.8%, also an increase from March.
However, the Fed in its policy statement noted “modest” recent progress on inflation. To that end, Chair Jerome Powell said the Fed “welcome[d]” Wednesday’s CPI print while noting it would need to see similar future readings to remain confident in inflation’s progress.
“We have the ability now to approach this question carefully and that’s what we are doing,” he said of rate cuts in response to a question from Yahoo Finance. He added that it is not the Fed’s plan to “wait for things to break and then try to fix them.”
