The Bureau of Labour and Statistics has just published the May Consumer Price Index (CPI) data, providing an essential insight into inflation trends in the U.S. economy. This report plays a pivotal role in shaping expectations for the Federal Reserve’s upcoming interest rate decision, set to take place next week.
Today’s report is especially significant as it will serve as a determinant to whether American consumers are being negatively affected by tariff policies. The last report for April showed a slower inflation trend.
Now, as more time has passed since “Liberation Day” tariffs, the May CPI report will give us further insight into how these trade policies are influencing consumer prices.
May CPI Data
- Core CPI (MoM) (May) – Forecast: 0.3% | Previous: 0.2% | Actual: 0.1%
- Core CPI (YoY) (May) – Forecast: 2.9% | Previous: 2.8% | Actual: 2.8%
- CPI (YoY) (May) – Forecast: 2.5% | Previous: 2.3% | Actual: 2.4%
- CPI (MoM) (May) – Forecast: 0.2% | Previous: 0.2% | Actual: 0.1%
The numbers are in, and inflation has cooled faster than anticipated in May. The core CPI reading—which excludes food and energy—came in at 0.1% MoM, well below the 0.3% forecast, signaling a slowdown in price increases for essential goods and services. The headline CPI also undershot estimates, with both the MoM and YoY readings coming in softer than expected.
As inflation continues to cool despite uncertainty revolving tariff policies, the Fed now has more flexibility to ponder its interest rate decision on the next FOMC meeting in June 18. The softer-than-forecasted CPI report suggests that underlying price pressures are easing, reinforcing arguments for potentially setting the stage for rate cuts later this year.
During several speeches this year, the Federal Reserve Chair Jerome Powell has emphasized the need for substantial evidence that inflation is not rising before making a policy shift. With both headline and core CPI figures undershooting forecasts, this report strengthens the case for a more dovish approach, allowing policymakers to focus more on growth concerns rather than persistent inflation risk
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