Breaking News: US CPI rises to 2.4% YoY in May vs 2.5% expected

Breaking: US CPI rises 0.1% MoM in May, below estimates of +0.3%. YoY CPI rose to 2.4%. Core CPI (ex food and energy) also rose 0.1% MoM, below forecasts of +0.2%, now at 2.8% YoY.

• Released today at 08:30 EDT, US inflation, measured by the Consumer Price Index (CPI), came in lower than expected, alleviating fears of sticky inflation

• While the Federal Reserve has recently renewed its commitment to following the data to determine future monetary policy decisions, today’s report shows inflation rising below expectations, increasing rate cut bets

• Albeit falling below consensus today, the effects of previous tariffs on US inflation are yet to be fully understood, allowing the Federal Reserve an opportunity to delay rate cuts further

Writing ahead of their June 18th meeting, the Federal Reserve is still overwhelmingly predicted to leave rates unchanged, despite inflation coming in lower than expected.

That said, pressure is now mounting on the Federal Reserve, which, by all accounts, will have a harder time justifying deferring rate cuts further, especially following renewed commitments to ‘follow the data’.

Perhaps somewhat unsurprisingly, much of the aforementioned pressure comes by way of 47th president Donald Trump, who chose to reiterate demands for a 100bps rate cut following the release.

In fairness, and when considering a better-than-expected nonfarm payrolls last Friday, recent data objectively supports the notion of further rate cuts, at least for now.

With that said, markets still expect the Federal Reserve to cut for the first time in September, likely to cite the potential for tariff-born inflation, the effects of which are yet to be fully understood.

Read more on today’s CPI report, including market reaction: CPI Misses, Everything (But the Dollar) Rallies–Market Reactions