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    Report Shows Inflation Pullback Ahead of Fed Decision on Interest Rates

    Gold and silver traded higher Wednesday morning, following a new report showing inflation retreated slightly last month. This boosted confidence among investors that Federal Reserve officials might be more inclined to cut interest rates sooner rather than later. 

    The Consumer Price Index released by the U.S. Bureau of Labor Statistics declined to a 3.3% annual rate in May from a year earlier, down from 3.4% in April. Prices on a monthly basis were unchanged last month on a seasonally adjusted basis after rising 0.3% in April. Wall Street had projected a 0.1% monthly increase and an annual increase of 3.4%.

    While consumer costs for things like gasoline and groceries eased or came in relatively flat, housing inflation continued its stubborn hold on prices, rising 0.4% for the fourth month in a row, the BLS report found. The index for food increased 0.1% in May, while the energy index fell 2% for the month. 

    Gold and silver both traded higher Wednesday morning on the report’s release, with the yellow metal up $13.03 at $2,331 per ounce and silver gaining $0.65 at around $30 per ounce. 

    The CPI report was released just hours before federal policymakers are expected to make an announcement on interest rates, which are at a 23-year high. Fed Chairman Jerome Powell is also expected to deliver public remarks that may reveal federal officials’ appetite for rate trims in the short term.

    Signs of an inflation pullback may support investors’ hopes that a cut could come as soon as September, even after a slew of dismal reports last week raised more questions than answers on the fragility of the economy and labor market. 

    On Tuesday, a survey by the National Federation of Independent Business showed that U.S. small business owners continued to be less optimistic about the state of the economy last month, with 22% of respondents citing stubborn inflation as the reason for the negative outlook.

    Disclaimer: All Market Updates are provided as a third party analysis and do not necessarily reflect the explicit views of JM Bullion Inc. and should not be construed as financial advice.

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