Daily Market Color

Chair Powell Says Recent Data Highlight Inflationary Progress and a Cooler Labor Market

Rates little changed while equities close at all-time highs. Chair Powell’s testimony to Congress did little to sway rates, as he provided minimal insight on the rate cut timeline and generally offered a balanced perspective. Rates closed nearly flat after strong demand at a $58B 3y Treasury auction forced rates to fall ~3bps from session highs. Meanwhile, the S&P 500 and NASDAQ closed at all-time highs of 5,577 and 18,429, respectively.

Powell says that recent data showed “modest” inflationary progress. Chair Powell reiterated recent comments today that the most recent inflation data, where consumer and producer prices grew at a slower pace than expected and PCE slowed to a multiyear low, showed signs of progress toward the Fed’s 2% long-term goal. He also emphasized the need for “more good data” before the Fed can cut policy rates, signaling that a move at the upcoming July 31 meeting is unlikely. Separately, he highlighted “considerable” labor market cooling based on “the latest data… I wouldn’t have said that until the last couple of readings.”

Headline Mexico inflation was higher than expected in June. Mexico consumer prices grew at a faster pace than expected in June on a headline basis, accelerating from 4.69% in May to 4.98% in June (YoY). The print marked the highest rate of inflation since June 2023 (5.06%), while MoM headline inflation rose to 0.38% growth from -0.19% deflation in May. Bank of Mexico Deputy Governor Jonathan Heath labelled the data “very concerning”, and further rate cut delays could be likely. The central bank most recently held rates steady at 11% in a 4-1 split vote.

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