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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

Scoop: Border officials project 13,000 child migrants in May

The "El Chaparral" border crossing at Tijuana. Photo: Stringer/Picture Alliance via Getty Images

A Customs and Border Protection staffer told top administration officials Thursday the agency is projecting a peak of 13,000 unaccompanied children crossing the border in May, sources directly familiar with the discussion told Axios.

Why it matters: That projection would exceed the height of the 2019 crisis, which led to the infamous "kids-in-cages" disaster. It also underscores a rapidly escalating crisis for the Biden administration.

4 hours ago - World

U.S. strikes Iran-backed militia facilities in Syria

President Biden at the Pentagon on Feb. 10. Photo: Alex Brandon - Pool/Getty Images

The United States on Thursday carried out an airstrike against facilities in Syria linked to an Iran-backed militia group, the Pentagon announced.

The state of play: The strike, approved by President Biden, comes "in response to recent attacks against American and Coalition personnel in Iraq, and to ongoing threats to those personnel," Pentagon press secretary John Kirby said in a statement.

Senate parliamentarian rules $15 minimum wage cannot be included in relief package

Photo: Al Drago/Getty Images

The Senate parliamentarian ruled Thursday that the provision to increase the minimum wage to $15/hour cannot be included in the broader $1.9 trillion COVID relief package.

Why it matters: It's now very likely that any increase in the minimum wage will need bipartisan support, as the provision cannot be passed with the simple Senate majority that Democrats are aiming to use for President Biden's rescue bill.

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