The Consumer Price Index (CPI) for May showed that headline inflation continues to decelerate, dropping sharply from 4.9% last month to 4.0%, the lowest level since April 2021. However, core inflation is proving significantly stickier and remains above 5%.
Commentary from Federal Reserve (Fed) speakers had suggested that it would take a meaningful upside inflation surprise to convince them to hike at their June FOMC meeting, tomorrow. With headline inflation coming broadly in line with expectations, tomorrow’s meeting will likely be the first since March 2022 without a policy rate hike. Yet, with core inflation remaining stubbornly elevated and still a cause for concern, prospects for an additional hike at the July FOMC meeting are very much alive.
Consumer Price Index
Year-over-year % change, 2010–present