Apr 26, 2019

Weak inflation stokes speculation the Fed may cut interest rates

Expand chart
Adapted from the U.S. Department of Commerce; Chart: Axios Visuals

The Fed's preferred measure of inflation sank in the first quarter, coming in at 1.3% compared to 1.8% in the prior quarter, the Commerce Department said on Friday.

Why it matters: Inflation continues to drift further below the Fed's 2% target, despite strong economic growth and a booming labor market — strengthening the case to hold off on raising interest rates and potentially cut rates.

  • As of Friday afternoon, traders' bets that the Fed would cut rates by year-end jumped 1.3% higher from where they were yesterday. In the meantime, the odds of two rate cuts rose to 20% from 15%.

The backdrop: The Trump administration, including President Trump himself, has called on the Fed to cut interest rates and sought to fill vacant seats at the Fed with candidates who support this case.

  • The White House's top economic adviser Larry Kudlow said again on Friday that the Fed should cut rates, telling CNBC: "The inflation rate continues to slip lower and lower."
  • Fed officials have also hinted at the possibility of a rate cut, as Bloomberg points out. Earlier this month, Chicago Fed president Charles Evans told reporters that if "inflation were to move down to, let's just say, 1.5%" that would mean interest rates at the current level were "holding back inflation, and so that would naturally call for a lower funds rate."

What's next: The Fed will hold a two-day policy meeting next week. No rate change is expected, but brace for plenty of questions about whether or not the Fed is concerned about the inflation slowdown.

Go deeper: The absence of inflation is forcing a wide-ranging rethink of long-held economic assumptions

Go deeper

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 10 p.m. ET: 1,014,673 — Total deaths: 52,973 — Total recoveries: 210,335Map.
  2. U.S.: Total confirmed cases as of 10 p.m. ET: 244,678 — Total deaths: 5,911 — Total recoveries: 9,058Map.
  3. 2020 updates: The Democratic National Committee said its July convention will be postponed until August because of the coronavirus. A federal judge declined to delay Wisconsin's April 7 primary election.
  4. Jobs latest: Coronavirus unemployment numbers are like a natural disaster hitting every state.
  5. Public health latest: Anthony Fauci called for all states across the U.S. to issue stay-at-home orders. The FDA will allow blood donations from gay men after 3-month waiting period, citing "urgent need."
  6. Business latest: Treasury Secretary Steven Mnuchin said oil companies are eligible for aid from new lending programs the Federal Reserve is setting up, but not direct loans from his department.
  7. U.S.S. Theodore Roosevelt: Navy removes captain of aircraft carrier who sounded alarm about coronavirus.
  8. 1 future thing: In developing countries, consequences of COVID-19 could be deeper and far more difficult to recover from.
  9. What should I do? Answers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  10. Other resources: CDC on how to avoid the virus, what to do if you get it.

Subscribe to Mike Allen's Axios AM to follow our coronavirus coverage each morning from your inbox.

Mark Meadows considers new White House press secretary

Photos: Alyssa Farah, Defense Department; Stephanie Grisham, Alex Wong/Getty Images; Kayleigh McEnany, Scott W. Grau/Icon Sportswire via Getty Images

White House Chief of Staff Mark Meadows has privately discussed bringing on Pentagon spokesperson Alyssa Farah or Trump campaign spokesperson Kayleigh McEnany as a new White House press secretary, two sources familiar with the talks tell Axios.

Why it matters: Meadows' start on Tuesday as Trump's new chief presents a chance to overhaul a press shop that's kept a low profile since President Trump ended the tradition of daily press secretary briefings.

CNN: Fauci advises all states issue stay-at-home orders

Dr. Anthony Fauci listens to President Trump speak during a briefing on April 1. Photo: Win McNamee/Getty Images

Director of the National Institute of Allergy and Infectious Diseases Anthony Fauci recommended on Thursday that all states across the U.S. implement stay-at-home orders, at a CNN town hall.

Why it matters: The recommendation stands in contrast to President Trump's calls for "flexibility." Nearly 4o states have issued stay-at-home orders to promote social distancing as a way to combat the novel coronavirus — but the orders vary in strictness and duration.

Go deeperArrow7 hours ago - Health