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Weekly Economic Update

Posted: June 18, 2018

Fed, New Tariffs Get Wall Street's Attention

As expected, the Federal Reserve adjusted the target range on the federal funds rate to 1.75%-2.00% on Wednesday. The central bank’s latest dot-plot projection, however, raised some eyebrows: it showed four interest rate increases planned for 2018 instead of three. The median forecast of Fed officials puts the benchmark interest rate at 2.4% at the end of this year, on the way to a peak of 3.4% in 2020. Friday morning, the Trump administration announced new 25% tariffs on at least $34 billion of Chinese imports. Hours later, China retaliated, declaring that it would levy 25% import taxes on a minimum of $34 billion of goods from America. The U.S. and China both plan to implement their new tariffs on July 6.1,2

Yearly Inflation Reaches 2.8%

The latest Consumer Price Index shows the highest 12-month inflation reading in six years; the core CPI (which leaves out food and fuel costs) rose 2.2% in the year ending in May. Both the headline and core CPI were up 0.2% last month. Wholesale inflation, as measured by the Producer Price Index, increased 0.5% in May.3,4

An Impressive Advance for Retail Sales

According to the Department of Commerce, the May gain was 0.8% (0.9% with car and truck buying factored out). This follows an April improvement of 0.4% (revised up from 0.3%).4

A Mixed Week for the Major Indices

Once again, the Nasdaq Composite outran the Dow Jones Industrial Average and S&P 500. Last week, the tech benchmark added 1.32% to settle at 7,746.38 at Friday’s closing bell. The S&P 500 ended up flat for the week (+0.01%) at 2,779.42. At Friday’s close, the Dow Jones Industrial Average had slipped 0.89% in five days to 25,090.48.5

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CITATIONS.
1 - marketwatch.com/story/fomc-lifts-fed-funds-rate-to-175-2-signals-4-hikes-in-2018-2018-06-13 [6/13/18]
2 - cnbc.com/2018/06/15/china-announces-retaliatory-tariffs-on-34-billion-worth-of-us-goods-including-agriculture-products.html [6/15/18]
3 - bloomberg.com/news/articles/2018-06-12/u-s-consumer-prices-rise-by-most-since-2012 [6/12/18]
4 - briefing.com/investor/calendars/economic/2018/06/11-15 [6/15/18]
5 - markets.wsj.com/us [6/15/18]

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