US May CPI 4.2% matched expectations in May, while the US dollar slipped after the data and rate hike pricing changed little.
The annual headline reading came in at 4.2%, in line with the expected 4.2%. The source said this was the hottest year-on-year print since April 2023. However, the report’s core details were softer, with core CPI rising 0.2% on the month, the weakest increase since February.
Shelter rose 0.3% in the report. Owners’ equivalent rent matched that pace. Meanwhile, motor vehicle insurance fell 1.7%, which helped ease some pressure in the core figures.
US May CPI 4.2% and Core Details
Energy drove much of the monthly increase. The source said energy made up more than 60% of the monthly gain, with gasoline as the main factor. Therefore, the report pointed to an oil-led rise in headline inflation rather than a broad-based jump across categories.
The article said the market focus now turns to how policymakers treat an oil-driven rise in the headline number. It also noted that year-on-year inflation could move toward 4.5% or more as base effects build. At the same time, the source said core inflation, even at a 0.2% monthly pace, still runs above 2% on a compounded basis.
Market Reaction After the Data
Before the release, markets priced in 11.7 basis points of rate hikes for September and 25.3 basis points for December. After the report, that pricing was described as virtually unchanged. That showed traders did not see the data as materially hotter than expected.
Stocks also steadied after the release. The pre-market drop in S&P 500 futures narrowed to 0.5%, while Russell 2000 futures were flat. Meanwhile, the US dollar dipped on the numbers.
The source also referred to a December comment from White House’s Kevin Hassett, who said, “If inflation has gone from 2.5% to 4%, you can’t cut rates then.”
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