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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

Trump set to appear at Pennsylvania GOP hearing on voter fraud claims

President Trumpat the White House on Tuesday. Photo: Chip Somodevilla/Getty Images

President Trump is due to join his personal lawyer Rudy Giuliani in Gettysburg, Pennsylvania, Wednesday at a Republican-led state Senate Majority Policy Committee hearing to discuss alleged election irregularities.

Why it matters: This would be his first trip outside of the DMV since Election Day and comes shortly after GSA ascertained the results, formally signing off on a transition to President-elect Biden.

Scoop: Trump tells confidants he plans to pardon Michael Flynn

Photo: Alex Wroblewski/Getty Images

President Trump has told confidants he plans to pardon his former national security adviser Michael Flynn, who pleaded guilty in December 2017 to lying to the FBI about his Russian contacts, two sources with direct knowledge of the discussions tell Axios.

Behind the scenes: Sources with direct knowledge of the discussions said Flynn will be part of a series of pardons that Trump issues between now and when he leaves office.

Erica Pandey, author of @Work
9 hours ago - World

Remote work shakes up geopolitics

Illustration: Eniola Odetunde/Axios

The global adoption of remote work may leave the rising powers in the East behind.

The big picture: Despite India's and China's economic might, these countries have far fewer remote jobs than the U.S. or Europe. That's affecting the emerging economies' resilience amid the pandemic.

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