Daily Market Color

Rates Steady as FOMC Meeting Begins

Rates quiet across the curve as FOMC meeting begins

The FOMC’s two day meeting began today, and while markets expect the Fed to keep rates unchanged they will be watching for any signs of policy shifts or hints around the potential tapering of the Fed’s bond-buying program. Today’s PPI print, which came in higher than economists’ estimates, has added some fuel to the fire on the inflation debate, and investors will be watching closely on any shift in the Fed’s policy to combat inflationary pressures. Swap rates and yields were steady across the curve in preparation for tomorrow’s policy guidance with the 10-year yield closing flat on the day at 1.49%. All three major equity indices closed down led by the tech-focused Nasdaq as inflationary pressures weighed on equities.

Retail sales fall in May

U.S. retail sales decreased 1.3% in May, while analysts estimated a decrease of 0.8%. Retail sales are expected to moderate as more services become available as the economy reopens and generous unemployment benefits begin to expire.

Producer prices increase more than expectations

The producer price index increased 0.8% in May, while core-PPI (excludes food and energy) increased 0.7%. Economists were expecting a 0.5% increase in both numbers. YoY PPI rose to 6.6%, the highest increase since 2010. Material prices have continued to increase while labor expenses and supply chain disruptions have all attributed to increasing production costs in recent months.

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