AUS
NZ
UK
CA
USA
IND
Investors on the Australian Stock Exchange (ASX) are celebrating positive inflation and interest rate news from the United States. The S&P/ASX 200 Index is experiencing a strong rally today, rising 0.56% to 7,758 points in afternoon trade on Thursday. This boost comes despite two consecutive days of losses earlier this week, bringing the ASX 200 up 0.9% for June so far.
US Market Influence
Australian shares are mirroring the gains of their US counterparts. The S&P 500 Index closed 0.9% higher overnight at 5,421 points, marking a new all-time high as the US equity bull market extends into its 20th month. Investor enthusiasm is high, driven by promising US inflation data, leading traders to forecast two interest rate cuts from the US Federal Reserve in 2024, despite the Fed's own projection of just one cut this year and more in 2025.
ASX 200 Soars as US Inflation Slows
The recent US inflation report has played a significant role in lifting the ASX 200 today. The US core consumer price index (CPI), which excludes volatile items like food and energy, increased by 0.2% in May, putting the annual increase at 3.4%. This marks the lowest inflation rate in three years.
"The most recent inflation readings have been more favorable than earlier in the year," said Federal Reserve Chair Jerome Powell. He added that "there has been modest further progress toward our inflation objective," although this was not enough to prompt an interest rate change.
Federal Reserve Holds Interest Rates Steady
In a widely anticipated move, the Federal Open Market Committee (FOMC) unanimously decided to maintain the official US interest rate in the 20-year high range of 5.25% to 5.50%.
The Fed now forecasts only one rate cut in 2024 but expects to cut rates four times in 2025, an increase from previous expectations of three cuts. "Rate cuts that might have taken place this year take place next year."
Expert Opinions
Bloomberg's Economics team found the May CPI report encouraging and anticipates a series of similar reports this summer. This trend could set the stage for the Fed to start cutting rates in September. Jim Bullard, former president of the St. Louis Fed, commented, "This was good news for the committee. They've been looking for a softer report, and they got it here."
