Trump doubles down on Fed criticism, warns rates are too high

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While some investors were still jumping into a rally sparked by a U.S. -Mexico trade and immigration agreement reached on Friday, others were looking ahead to the June 18-19 Fed meeting and expectations of trade talks between the United States and China leaders later in the month. And unlike last month, Fed officials haven't explicitly pushed back against the market pricing in expected cuts.

Fed watchers say the latest economic data boost the odds that central bank will move sooner rather than later to lower rates.

The nation's consumer price index inched up 0.1 percent in May on a seasonally adjusted basis, slowing from April when it rose 0.3 percent, the U.S. Bureau of Labor Statistics reported Wednesday.

Food prices rose 0.3% in May after having dipped in April.

While many economists now argue the Fed is likely to cut rates this year, some said they were reluctant to change their base case forecasts for the federal funds rate immediately, citing rapidly changing developments on trade talks. -China trade war in that he controls China's central bank while Trump must deal with a Federal Reserve that is "very destructive to us".

The core inflation rate rose by only 0.1% last month, which knocked the annual rate down to 2%, when markets had looked for a 0.2% gain to keep the 12-month core price index steady at 2.1%.

The Fed can afford to be aggressive because inflationary pressures are muted.

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Previous data has shown that the rate cut will be appropriate. Others expect the rate cut to happen in the September meeting.

The Dollar index was quoted 0.09% higher at 96.77 following the release but has fallen 0.6% in the last week and is now up just 0.7% for 2019 after having scored as much as 2% year-to-date gain in middle of May.

"For now, inflation pressures in aggregate remain benign".

The Fed's Federal Open Market Committee, charged with setting key USA interest rates, could decide to cut rates in coming months given recent weak job and inflation data.

The first real sign of trouble that the USA economy may be fast running out steam came from Friday's jobs report that showed a big drop in payrolls in May.

"For the first time in a while the US president made a decision to criticise the currency policies of other countries", said Makoto Noji, chief currency and foreign bond strategist at SMBC Nikko Securities. The Fed will update its economic forecasts as well as its famous dot-plot chart at its June meeting, with the big question being on whether or not policymakers will foresee a rate cut in their projections. The S&P 500 index ended up by 2.1 %. It has been below the central bank's 2% target for most of the last decade.

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