A pause in the policy program A pause in the policy program http://www.federatedinvestors.com/mmdt/static/images/mmdt/mmdt-logo-amp.png http://www.federatedinvestors.com/mmdt/daf\images\insights\article\mmdt-weekly-Small.jpg June 13 2025 June 16 2025

A pause in the policy program

Weekly Bond Commentary

Published June 16 2025

The Federal Reserve will enter its June FOMC meeting this week still without much confirmation in the hard data regarding the condition of the US economy. As a result, the committee is widely expected to remain on pause.

The labor market is showing some small cracks. Initial jobless claims last week were unchanged at 248,000, though still nudging the four-week moving average higher again. However, continuing unemployment claims saw a more significant increase of 54,000 week-over-week to the highest level since 2021.

The other side of the Fed’s dual mandate, inflation showed some modest near-term improvement but remains stubbornly above policymakers' 2% target. May headline and core inflation increased just 0.1% month-over-month, lower than expected. On a year-over-year basis, core CPI inflation held steady at 2.8% for the third month in a row. It remains difficult to parse out the tariff impact within the various categories, and most of it has likely yet to come. One positive for late-summer travelers: airfare costs fell again.

Economic survey results indicate the mood of the US consumer has perked up. The latest University of Michigan sentiment index jumped to 60.5, from 52.2 prior, reaching the highest reading since February. One-year forward inflation expectations fell to 5.1%, from 6.6%, while long-run expectations remained around 4%. We will see if these improvements translate to pocketbooks as retail sales data will be released later this week.

Tags Markets/Economy . Fixed Income .
DISCLOSURES

Views are as of the date above and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector.

Consumer Price Index (CPI): A measure of inflation at the retail level.

The University of Michigan Consumer Sentiment Index is a measure of consumer confidence based on a monthly telephone survey by the University of Michigan that gathers information on consumer expectations regarding the overall economy.

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