Skip to main content

US CPI Report for May

  • Gregory Faranello, head of US rates trading and strategy for AmeriVet Securities says the CPI is a “really nice inflation reading,” and they expect that trend to continue. The Fed meeting today should see officials “move toward two rate cuts for 2024” and softer CPI readings from here “will keep a September cut in play.”

Below are the key takeaways from the live blog event “US CPI Report for May”, followed by a complete transcript of blog entries in the order they were originally posted.

06/12 09:40 ET
Thanks for joining us. Here are five key takeaways from the May US consumer price index report released Wednesday:

* The overall CPI was flat in May compared with April, the first
time in almost two years that it didn’t climb — thanks in part
to a drop in gasoline prices on the month. The core index, which
excludes food and energy, rose 0.2%, the least since last
October – undershooting all but 12 of the 71 forecasts in
Bloomberg’s survey.

* Services were the main reason why core inflation came in less
than forecast, helped by a decline in car insurance after the
biggest run-up in prices in that category since the 1970s.
Airline fares were also down. The so-called supercore services
gauge, which excludes housing, dropped by 0.04%, the first
decline since 2021 and boding well for the Fed’s preferred
inflation gauge, the PCE, which is out later this month.

* The annual rate of core inflation came down to 3.4%, the
lowest since April 2021, aided by the smallest increase in
housing costs in more than two years. Headline CPI came in at

* The release boosted the likelihood of Fed policymakers
projecting two rate cuts for 2024 when they release their
updated forecasts later on Wednesday, economists said. Interest-
rate futures showed increased bets on the Fed kicking off rate
cuts in September.

* Treasuries and stocks climbed, while the dollar slid. Two-year
Treasury yields were down about 16 bps as of 9:32 a.m. in New
York, at 4.68%. The S&P 500 opened up 0.8%. The Bloomberg Dollar
Spot Index was down 0.5%, for the biggest drop since mid-May.

Chris AnsteySenior Editor

06/12 07:40 ET
Welcome to TOPLive’s coverage of the US Consumer Price
Index report for May. With the job market showing some softening
and other economic indicators pointing to a slowdown, attention
turns to the monthly consumer inflation report to see whether a
similar cooling is apparent in prices. The data will have an
impact on policy, pocketbooks and politics. Join us on starting
at 8:15 a.m. New York time, 15 minutes before the numbers come
out, for news, analysis and market reaction.
Andrew DunnTOPLive Editor

06/12 08:15 ET
Good day. I’m economics editor Chris Anstey, and my
colleagues and I will be bringing you news and analysis of Part
I of Wednesday’s double-header on the US economy. The May
consumer price index release is the appetizer, of course, for
the Federal Reserve policy decision and Fed Chair Jerome
Powell‘s press conference later in the day.

So here are the main CPI economist estimates:
* Headline CPI is seen rising 0.1% from April, the least since
last October — thanks in part to a decline in gas prices in
* Core CPI, which excludes food and energy, is forecast to rise
0.3%, the same as in April.
* The annual CPI increase is projected at 3.4% for the headline,
the same as April, and at 3.5% for the core measure, a tick down
from 3.6%.

Chris AnsteySenior Editor

06/12 08:16 ET
What Bloomberg Economics expects:
* Headline CPI likely will increase 0.1% (versus 0.3% prior),
corresponding to a year-over-year change of 3.3% (versus 3.4%
* Core CPI inflation — which is more important for the rates
outlook — should again rise 0.3% monthly, and 3.5% year over
year (versus. 3.6% prior).
* If our CPI forecasts are correct, we estimate the Fed’s
preferred inflation indicator — the core PCE deflator, due out
June 28 — will again rise 0.2% monthly, and will slow to 2.7% in
year-over-year terms (vs. 2.8% prior).

Read the full preview:
Core Goods to Keep CPI on Fed’s Disinflation Track

Michael ArnoldBloomberg Economics Editor

06/12 08:17 ET
From Bloomberg Economics’ Anna Wong:
“May’s CPI report should give the Fed some additional
reassurance that inflation is slowing. We expect prices of core
goods — particularly new cars and recreational goods – to be key
drivers of the moderation, as businesses offer discounts to draw
in consumers tightening their purse strings. Housing-rent
inflation will also continue its gradual move downward.

“We expect CPI prints over the summer to proceed at a
similar pace to our May forecast. With three more such prints in
hand by the time of the September FOMC meeting, we think Fed
officials will be convinced to start cutting rates then.”
Michael ArnoldBloomberg Economics Editor

06/12 08:18 ET
The forecast for core inflation would leave price pressures
still running too hot for the Fed. We haven’t seen a 0.2% core
monthly increase since last October; they keep coming in at 0.3%
or 0.4%. And that’s not consistent with the Fed’s 2% inflation

Remember that the Fed uses a separate inflation gauge for
its target and its forecasts — the PCE price index — and CPI
typically runs a little hotter. But 3.5% core CPI annual
inflation is quite far from being consistent with a 2% PCE
target. PCE data for May comes out on June 28; the April annual
gain was 2.7% headline and 2.8% core.
Chris AnsteySenior Editor

06/12 08:18 ET
The biggest element keeping core inflation high has been
the cost of housing, or “shelter” as it’s termed. Policymakers
have been pointing to new lease prices having come down for some
months now, and anticipate that this will eventually help to
pull down core inflation. But the process has taken much longer
than both the Fed and private economists expected.
Chris AnsteySenior Editor

06/12 08:19 ET
Friday’s jobs report showed an unexpected acceleration in
wage gains in May. Let’s see if that’s also reflected in today’s
inflation release. Wages make up a bigger share of services
prices, and core services prices — that is, excluding shelter –
– have been a key focus for Fed policymakers. This so-called
supercore measure hasn’t been trending in the right direction
for the Fed:
Chris AnsteySenior Editor

06/12 08:20 ET
This CPI report comes in the middle of the Fed’s policy
meeting, which began on Tuesday and concludes this afternoon. At
this gathering, the Board of Governors and district bank
presidents are submitting fresh economic and policy-rate
forecasts. It’s possible the May CPI will tilt some projections,
though you’d have to figure that officials had pretty much
finalized their forecasts.

The key forecast for this afternoon will be what is the
median estimate for the benchmark interest rate for the end of
2024. In March, the median reflected three rate cuts being
penciled in. That’s almost certainly going to be adjusted due to
sticky inflation.

Economists are divided on whether the new median will be
two cuts, one — or none:
Fed Seen Curbing Rate-Cutting Plans With Inflation Staying
Chris AnsteySenior Editor

06/12 08:21 ET
Here’s the language on inflation from the May 1 Fed policy
statement. It’s hard to see this changing based on the CPI
release, but let’s see what we get.
“Inflation has eased over the past year but remains
elevated. In recent months, there has been a lack of further
progress toward the Committee’s 2% inflation objective.”
Chris AnsteySenior Editor

06/12 08:22 ET
Month after month, soaring auto insurance has been stinging
consumers — premiums rose by 1.8% in April and by 22.6% from
just 12 months before, continuing their fastest pace of increase
since 1976 when the Jimmy Carter faced off against Gerald Ford
for the presidency.

Analysts blame the surge on factors such as post-pandemic
catch-up and the complexity of modern cars that make them more
expensive to service and repair. Whatever the reason, it’s not
expected that June will see premiums cool dramatically.
Enda CurranGlobal Economy Reporter

06/12 08:23 ET
What else happened in May? The cost of shipping containers
soared to their highest since 2022. The cost of a 40-foot
container to move merchandise to Los Angeles from Shanghai at
one point jumped 18% to $5,277 due to strong demand and, of
course, geopolitical turmoil.

The bad news is those charges will eventually be passed
along to consumers on Main Street. The good news is that it
takes some time for those costs to flow through the economic
system, so this shouldn’t be an issue to worry about — for now.
Enda CurranGlobal Economy Reporter

06/12 08:24 ET
In the context of the Fed debate, a rate cut in July is
more or less off the table, so the question is how today’s
numbers will nudge expectations for a September move. A hot set
of numbers would surely lean against a cut, but equally a cooler
overall reading would give confidence that disinflation is back
on track.

It’s very finely poised.
Enda CurranGlobal Economy Reporter

06/12 08:24 ET
In April the spread between “supercore” and core inflation
widened by the most in at least a decade as items such as auto
insurance drove the supercore rate higher. The spread rose from
close to zero at the beginning of the year to 1.27 percentage
points in April. Chart from {ECAN <GO>} on the Terminal.
Alexandre TanziEconomic Data Editor

06/12 08:25 ET
The May CPI reading marks the opening salvo of what could
be a very volatile and hectic session for rate and currency
traders, with a Fed statement and updated dot-plot forecasts,
followed by Powell’s press conference.

Ian Lyngen, head of rate strategy at BMO Capital Markets
“It’s difficult to overstate the relevance of the
combination of CPI and the Fed. Not only will the market have
updated information regarding the pace of realized inflation,
but so will the Fed – making the tone of the statement and the
press conference as real-time as one could want.”

Michael MacKenzieRates Reporter, New York

06/12 08:26 ET
From Bloomberg Economics’ Ana Galvao:
“US inflation data have tended to surprise to the upside
since February, with some notable recent exceptions. So far the
trend has driven up BE’s Macro-Yield model forecast for two-year
Treasuries to 4.4% at year-end, about 10 bps above consensus.
Our Macro-Finance tool — on the Terminal at {BECO MODELS MFIN<GO>}
— suggests a 0.1-ppt downside surprise in May’s headline and
core would close that gap.”
Michael ArnoldBloomberg Economics Editor

06/12 08:27 ET
John Madziyire, senior portfolio manager at Vanguard says:
“There’s a lot of uncertainty and you can’t have high
conviction heading into a CPI report in the morning and then the
Fed in the afternoon.”
“The best case scenario is it just comes in line as
expected,” he reckons. “If we get anything significantly off,
then clearly that’ll make it a volatile day.”
Michael MacKenzieRates Reporter, New York

06/12 08:27 ET
As it stands, swaps show about 37 basis points of rate cuts
priced for this year, with only a quarter-point fully priced for
the Fed’s December meeting. The bond market has consistently
priced fewer than two cuts since mid-March amid a run of sticky
inflation and resilient jobs reports.
BMO’s Lyngen says while a forecast core CPI print of 0.3%
for May “won’t offer an entirely convincing skew in the 25 bp
vs. 50 bp rate cut debate for 2024, it will leave 50 bp of cuts
on the table. A +0.4% would skew the odds in favor of a Q4
departure point for normalization at the earliest. Conversely, a
+0.2% would leave a September cut as the path of least

A soft CPI result could still leave September as a toss-up
because one good inflation number can only move the needle up to
a point.
Michael MacKenzieRates Reporter, New York

06/12 08:28 ET
From Bloomberg Economics’ Andrej Sokol:
“BE’s CPI nowcast — on the Terminal at {BECO MODELS
NOWCASTS<GO>} — is mostly consistent with consensus forecasts but
may flag slight downside risk in the core. With rounding, the
model predicts a month-on-month core reading of 0.2% versus 0.3%
in the Bloomberg survey.”
Read more:
Nowcasts From Jobs to Inflation Show US Economy May Be
Michael ArnoldBloomberg Economics Editor

06/12 08:29 ET
Market Check: Ahead of the report, S&P 500 futures are up
0.1%, Treasury yields are lower by about 1 basis point across
the curve, and the dollar is little changed. The 2-year yield is
at 4.82%.
Emily GraffeoCross Asset Reporter

06/12 08:29 ET
Worth noting we had inflation data from the world’s No. 2
economy overnight, where the picture looks very different to the

Here’s our story:
China’s Weaker-Than-Expected Inflation Fuels Demand
Enda CurranGlobal Economy Reporter

06/12 08:29 ET
OK, here we go…
Chris AnsteySenior Editor

06/12 08:30 ET
Consumer Prices Rise 3.3% Year-on-Year; Est. 3.4%
US May Consumer Prices Rise 3.3% Y/Y; Est. 3.4%
Ranjeetha PakiamEditor, Economics and Government

06/12 08:30 ET
Core Consumer Prices Rise 3.4% Year-on-Year; Est. 3.5%
US May Core Consumer Prices Rise 3.4% Y/Y%; Est. 3.5%
Ranjeetha PakiamEditor, Economics and Government

06/12 08:31 ET
Oh good news, inflation is ticking down!
Chris AnsteySenior Editor

06/12 08:31 ET
Core comes in a touch lower than expected.
Enda CurranGlobal Economy Reporter

06/12 08:32 ET
The core gain of 0.2% was forecast by only 12 out of the 71
economists surveyed by Bloomberg.
Chris AnsteySenior Editor

06/12 08:32 ET
Treasury yields are plunging.
Emily GraffeoCross Asset Reporter

06/12 08:32 ET
At first glance these numbers bolster the disinflation
Enda CurranGlobal Economy Reporter

06/12 08:34 ET
Treasury Yields Plunge
Treasury yields plunge on cooler CPI. Two-year yields drop
12 bps to 4.71%. Swap market’s rate cut pricing for 2024 jumps
to around 9 bps up to 48 bps by December.
Michael MacKenzieRates Reporter, New York

06/12 08:35 ET
From the Bureau of Labor Statistics:
“The index for all items less food and energy rose 0.2
percent in May, after rising 0.3 percent the preceding month.
Indexes which increased in May include shelter, medical care,
used cars and trucks, and education. The indexes for airline
fares, new vehicles, communication, recreation, and apparel were
among those that decreased over the month.”
Rich MillerEconomy and Fed Reporter

06/12 08:35 ET
So this effectively is the first month of good inflation
reports, per the Waller count that we flagged earlier. We need
another couple of good reports like this and that would really
put September in play for a Fed rate cut.
Chris AnsteySenior Editor

06/12 08:37 ET
Looks like cheaper gas prices helped.
Enda CurranGlobal Economy Reporter

06/12 08:37 ET
For the year-on-year core CPI increase, only two out of 54
economists had projected a 3.4% rate. Everybody else was higher.
Chris AnsteySenior Editor

06/12 08:37 ET
Fed Swaps Fully Price in Quarter-Point Rate Cut in November
Andrew DunnTOPLive Editor

06/12 08:37 ET
Shelter and Food Prices Post Slight Gains
Shelter costs rose 0.4% and the food index — very
politically sensitive — rose 0.1%.
Enda CurranGlobal Economy Reporter

06/12 08:38 ET
More from the BLS on the unchanged headline figure:
“More than offsetting a decline in gasoline, the index for
shelter rose in May, up 0.4 percent for the fourth consecutive
month. The index for food increased 0.1 percent in May…The
energy index fell 2.0 percent over the month, led by a 3.6-
percent decrease in the gasoline index.”
Rich MillerEconomy and Fed Reporter

06/12 08:38 ET
The 3.4% core annual CPI increase is the smallest since
April 2021.
Chris AnsteySenior Editor

06/12 08:39 ET
The dollar sank and yields tumbled as CPI came in below
expectations, on both the month-on-month headline and core
figures. The two-year Treasury yield fell a whopping 12 bps to
4.7%. SOFR futures yields are down more than 14 bps on the day
(having been less than 2 bps lower before the print.)
Sebastian BoydMarkets Live Strategist, Santiago

06/12 08:39 ET
Stock Futures Jump
Stock futures are spiking, S&P 500 futures are up 0.8%, the
tech-heavy Nasdaq 100 is up 1%.
Emily GraffeoCross Asset Reporter

06/12 08:40 ET
Interest-rate futures show traders are a little bit more
confident in two Fed rate cuts for this year. In our latest
survey of economists, 41% of the pool thought the Fed later
today would project two rate reductions, while 41% thought it
would be one or even none.
Chris AnsteySenior Editor

06/12 08:40 ET
In sort of good news, auto insurance fell on the month
but…the cost is 20.3% higher than a year ago.
Enda CurranGlobal Economy Reporter

06/12 08:42 ET
CPI means a September rate cut is back in play, with swaps
showing 18bps of a cut now priced. November returns to being
fully priced, at 29bps. Front end Treasury yields lower by
around 15bps. The yield curve steepener trade is getting the
most traction between 5yr and 30yr, as the long end lags the
Michael MacKenzieRates Reporter, New York

06/12 08:43 ET
Shelter Costs Biggest Component Core Increase
As always, shelter costs were the biggest component of the
increase in core prices — up 0.4% on the month. Medical-care
costs were also higher, along with prescription drugs.
Chris AnsteySenior Editor

06/12 08:45 ET
Bloomberg Intelligence Chief US Interest Rate Strategist
Ira Jersey has a first take:

“The knee-jerk reaction in the Treasury market isn’t
surprising given the Fed-friendly CPI print, particularly the
“low” 0.2% on core CPI. Jay Powell can now say ‘we’re making
slow but additional progress on inflation’ at this afternoon’s
press conference.”
Joseph RichterBloomberg Intelligence Editor

06/12 08:47 ET
“Between Apple’s upside breakout yesterday, and this
morning’s CPI number, the only thing standing in the way of a
further strong rally is Chairman Powell,” said Matt Maley, chief
market strategist at Miller Tabak.
Emily GraffeoCross Asset Reporter

06/12 08:47 ET
A big drop in airfares for the month of May, down 3.6%
after falling by 0.8% in April — we will have to see if that
trend continues over the bumper summer travel season.
Enda CurranGlobal Economy Reporter

06/12 08:47 ET
New vehicle prices dropped 0.5% after a 0.4% decline in
April. That’s boosting demand for cars.
Rich MillerEconomy and Fed Reporter

06/12 08:49 ET
Bullard: Numbers Good But Policymakers Need More Data
Former Fed official James Bullard tells Bloomberg
Television that these are good numbers but policymakers will
want to see a couple more months like this before they decide to
Enda CurranGlobal Economy Reporter

06/12 08:49 ET
The unchanged monthly increase in CPI was the first time
that’s happened since July 2022. Let’s see how the White House
characterizes this. The Biden administration got some flack
early on in the inflation surge when one of the monthly readings
similarly came in at 0% on the headline and officials claimed
that there was no inflation.
Chris AnsteySenior Editor

06/12 08:50 ET
Rates Market Back to Case for Two Cuts in 2024
The rates market is back to making a case for two rate cuts
this year. Notably, the market has not pushed beyond pricing in
two cuts for this year over recent months. Key point here is
that the Fed has made clear that it needs to see several cooler
readings to move toward a first rate cut.
Michael MacKenzieRates Reporter, New York

06/12 08:51 ET
More from BI’s Jersey:

“Investors have been asking if members of the FOMC might
change their summary of economic projection forecasts after the
CPI print, since they are submitted prior to the start of the
meeting. Today’s report probably doesn’t really shift
expectations much. We’ve been thinking November and December
cuts as our base base, and this data solidifies that view.”
Joseph RichterBloomberg Intelligence Editor

06/12 08:52 ET
CPI delivered the kind of downside surprise that bond bulls
and the Fed have been waiting for. Both headline and core came
in a tenth lower than expected, and the miss looks legit, given
the shortfall in the actual indices relative to forecast.
Indeed, at 0.16% the rise in core nearly rose just 0.1% when
rounded. Supercore services ex housing fell by 0.04%, the first
negative reading since September 2021. This naturally puts two
cuts in 2024 back as the obvious center of the likely policy
distribution, and opens the door for the market to price more in
Cameron CriseMacro Strategist, New York

06/12 08:52 ET
Bullard, the former St. Louis Fed President, tells
Bloomberg Television: “It does keep hope alive for those who
have been looking for an earlier rate cut. The best you can do
in July is set up a possible move for September.”
Michael MacKenzieRates Reporter, New York

06/12 08:52 ET
Gasoline prices tumbled 3.6% in May from April, one key
reason why the headline CPI was flat on the month.
Chris AnsteySenior Editor

06/12 08:53 ET
For context on how important housing costs are to US
inflation data, the shelter index rose 5.4% over the last year,
making up over two thirds of the total 12-month increase in the
all items less food and energy index.
Enda CurranGlobal Economy Reporter

06/12 08:53 ET
Bullard Sees ‘Immaculate Disinflation’
Returning to Bullard, who is speaking on Bloomberg
Television, he says we are now seeing “immaculate disinflation.”
Enda CurranGlobal Economy Reporter

06/12 08:55 ET
Dropping Prices Suggest Consumer Pushback
Are consumers facing increasing financial pressure and
resisting price increases? New car prices down, recreation
prices down, apparel prices down. Some retailers have reported
that they’re marking down prices to entice consumers into
Rich MillerEconomy and Fed Reporter

06/12 08:56 ET
If that move on two-year Treasury yields holds, it will be
the biggest single-day drop this year. Only of course, it
happened in minutes.

Sebastian BoydMarkets Live Strategist, Santiago

06/12 08:56 ET
This is the first time since the October report that the
core monthly CPI gain has undershot the median forecast. One
illustration of how inflation has been disappointing for much of
the past half-year.
Chris AnsteySenior Editor

06/12 08:57 ET
Here’s a breakdown on the energy component: the energy
index fell 2% in May, after rising 1.1% in April. But look at
the drop in the gasoline index — it fell 3.6% in May, a hefty
decline which took pressure off the headline reading.
Enda CurranGlobal Economy Reporter

06/12 08:58 ET
For any Fed governor or district bank president who had
been on the fence about one rate cut or two for 2024, this might
have tipped them over. All eyes at 2 p.m. in Washington will be
on that median estimate for the year-end policy rate.
Chris AnsteySenior Editor

06/12 08:58 ET
Used Car Prices Slide Over 9%
A good time to trade up? Prices for used cars and trucks
rose in May by 0.6% but they are down 9.3% from a year ago.
Enda CurranGlobal Economy Reporter

06/12 09:00 ET
Gregory Faranello, head of US rates trading and strategy
for AmeriVet Securities says the CPI is a “really nice inflation
reading,” and they expect that trend to continue. The Fed
meeting today should see officials “move toward two rate cuts
for 2024” and softer CPI readings from here “will keep a
September cut in play.”

Michael MacKenzieRates Reporter, New York

06/12 09:01 ET
This report really underscores the extent to which lagged
shelter inflation is the main thing keeping the overall index

In May, core CPI excluding shelter was up just 1.9% from a
year earlier, the least since March 2021.

Matthew BoeslerUS Economy Editor

06/12 09:01 ET
To Enda’s point on how car insurance may be down on the
month but it’s still up very sharply over the past year, the
overall encouraging nature of this report is for sure good news
for Biden but the challenge is everybody still feels the sting
of the long string of prior increases.
Chris AnsteySenior Editor

06/12 09:02 ET
“This was good news but it is one piece of news,” says
Lindsay Rosner, of Goldman Sachs Asset Management. Here’s how
she’s thinking about the timing of rate cuts:

“June is a no-go. We have felt July the same. Again today
is a good print for restrictive rates working to quell
inflation, so September is a possibility.”
Emily GraffeoCross Asset Reporter

06/12 09:03 ET
These figures will be welcomed by the White House given
they have lit up the debate for a Fed rate cut in September.
That’s the political dimension — but given the ups and downs of
inflation this year, the economics of this have a long way to go
Enda CurranGlobal Economy Reporter

06/12 09:03 ET
Here’s how the Wall Street professionals are revising their
bets on a Fed rate reduction based on today’s inflation report:
Traders Fully Price in November Fed Rate Cut After Cool CPI
Rick GreenSenior Editor, Americas Finance

06/12 09:03 ET
Bryce Doty, Sit Investment Associates senior portfolio
manager, weighs in:
“A calm CPI report. This CPI report gives the Fed the
flexibility to still cut rates. We still expect the Fed to hold
off until after the election though.”
Emily GraffeoCross Asset Reporter

06/12 09:04 ET
‘Supercore’ Price Gauge Dropped in May
Here’s a really good piece of news for Powell & Co.: the
so-called supercore price gauge actually declined last month.
This is services prices excluding shelter, which Fed officials
have been focused on for some time now. That index was down by
0.04% on a monthly basis, the best such performance since
September 2021.
Chris AnsteySenior Editor

06/12 09:05 ET
Powell will likely be very straight when he remarks on
these numbers at his press conference later — they obviously
point to progress but he will be very careful not to stoke bets
on a near term rate cut. He has already had to walk back the
December pivot and won’t want to get burned twice.
Enda CurranGlobal Economy Reporter

06/12 09:05 ET
The bond reaction after CPI is certainly impressive with
the policy-sensitive 2-year yield on course for its biggest one-
day slide since December. Of course, it’s early in a session
that still has a Fed meeting statement, upgraded forecasts and a
Powell press conference to come.
Michael MacKenzieRates Reporter, New York

06/12 09:05 ET
Here’s a look at the annual pace of supercore services CPI
inflation, which again excludes housing costs.
Chris AnsteySenior Editor

06/12 09:07 ET
The expectation at this point in markets will be that the
Fed later today projects two rate cuts for 2024. If we only get
one, that could see a negative reaction in Treasuries and
stocks. That said — Powell could undo that with dovish remarks
in the press briefing. In other words, we could get a volatile
day! But if the Fed confirms two cuts, that could offer a
further bullish push to markets heading into the close.
Chris AnsteySenior Editor

06/12 09:07 ET
Just to anchor some of the upbeat reaction to reality, it’s
worth noting that food prices are 2.1% higher from a year ago.
So yes, inflation appears to be slowing but the average consumer
continues to feel the burn at the cash register.
Enda CurranGlobal Economy Reporter

06/12 09:08 ET
Ashwin Alankar, head of global asset allocation at Janus
Henderson Investors, says the Fed needs to see more evidence of
cooling inflation:“Until greater dis-inflation evidence is seen
both in breadth and depth, today’s softness is supportive of a
preemptive cut rather than a pivot in Fed policy towards
Michael MacKenzieRates Reporter, New York

06/12 09:08 ET
From Bloomberg Economics’ Ana Galvao:
“The downside surprise in CPI could have an impact on asset
prices over the medium term, not just today. Bloomberg
Economics’ Macro-Finance model — on the terminal at {BECO
MODELS MFIN<GO>} — suggests forecasts for two-year Treasury yields
will fall by 15 bps through 1Q25.”
Michael ArnoldBloomberg Economics Editor

06/12 09:11 ET
The good news on inflation extended to the so-called
“supercore” measure of core services less housing. On a monthly
basis, the measure was negative for the first time since late

At -0.04% for May, it represents a significant cooling from
the 0.5% average pace in the prior three months. Of course, on
an annual basis things don’t look as good, but the measure also
pulled back a little to 4.8%, the lowest since March.

Also, check this one out: three-month annualized headline
CPI has dipped below 3%, for the first time since January. The
six-month figure is still in the mid 3%, however. (Chart via

Tatiana DarieMarkets Live, New York

06/12 09:13 ET
Here’s a bold call. Omair Sharif at Inflation Insights says
get ready for benign core inflation readings for the rest of
“A 0.2% monthly core CPI reading should be the base case
for the balance of the year, especially as it looks more and
more like the long-awaited slowdown in shelter costs will hit as
soon as the next report.”

Chris AnsteySenior Editor

06/12 09:14 ET
Not for the first time, a hat tip to Sharif for headline of
the morning on his reaction note:

CPI (May): Down & Out.
Enda CurranGlobal Economy Reporter

06/12 09:17 ET
It’s indeed shaping up to be good day for bonds. The
decline in inflation and deterioration in the jobs picture can
keep this rally going even after the FOMC later today, given we
have PPI and jobless claims data on Thursday.

As colleague Michael Mackenzie noted, a September rate cut
is now back in play — traders added 6 bps of bets toward
reductions and now see 75% chance of a cut, up from roughly even
odds before the data.

Now, we need to see not just what the dot plot signals, but
also what Powell says about inflation and a flagging job market
with rising jobless claims, an increasing unemployment rate and
lower job openings. If Powell is dovish, this rally can go

Edward Harrison”The Everything Risk” newsletter, Washington

06/12 09:19 ET
Olu Sonola, Fitch Ratings’ head of US economic research,
offers the following on CPI:

“This was unequivocally a good report, a delightful
appetizer while we await the main course later on today. The
core services print of 0.2% was the lowest since September 2021
and that will definitely boost confidence if that trend
continues over the next couple of months. While the door to an
interest rate cut in July is effectively shut, the window still
looks open for later on this year.”

Rich MillerEconomy and Fed Reporter

06/12 09:20 ET
As mentioned earlier, the Fed targets the other main
monthly inflation gauge, the PCE price index. That one isn’t out
until June 28. Morgan Stanley’s US economists, led by Ellen
Zentner, are now penciling in a core PCE increase of 0.12% for
May after these CPI figures. That would be less than half the
0.25% rise for April. The annual rate would then tick down to
2.58%. That would be the lowest since March 2021, when inflation
started popping.

The team says it will update its estimate after tomorrow’s
PPI report.
Chris AnsteySenior Editor

06/12 09:22 ET
Grocery Price Pressures Persist
Looking at the “food at home” basket, the only goods that
are cheaper from a year ago are dairy and related products.
Prices for cereals, meat, fish, eggs, poultry, fruit,
vegetables, beverages and other food at home are all higher.
That probably won’t come as a surprise to the average shopper.
Enda CurranGlobal Economy Reporter

06/12 09:26 ET
Today’s Fed meeting should neatly align with the swap
market, which after CPI, is back to nearly pricing in two
quarter-point cuts for 2024. The Fed’s widely expected revision
to the dot-plot from three to two cuts in 2024, means the focus
of traders will be on Powell and just how dovish he sounds.
BMO’s Lyngen says CPI “clears the path for the dot plot to
signal 50 bps of cuts in 2024 and ensures that Powell will offer
a dovish tone.”
Michael MacKenzieRates Reporter, New York

06/12 09:27 ET
Shelter Posts Smallest Year-on-Year Gain Since April 2022
Housing costs — or “shelter” as the BLS calls it — were
up 5.4% over 12 months, which marked the smallest rise since
April 2022. Maybe we are seeing the long-awaited subsiding of
housing. Policymakers have been counting on this for many months
Chris AnsteySenior Editor

06/12 09:28 ET
One-year US rate swaps fell to the lowest in two months as
traders react to the benign inflation print. So far though, the
overnight index swaps curve, which is probably the best
indicator of market rate expectations, is basically back where
it was a week ago, before the Friday payrolls surprise.

Sebastian BoydMarkets Live Strategist, Santiago

06/12 09:29 ET
Today’s post-CPI rally comes just one day after the S&P 500
closed at a record.

Emily GraffeoCross Asset Reporter

06/12 09:31 ET
Oh, late contender for reaction headline of the morning
comes from Neil Dutta, head of US economics at Renaissance
Macro. His email simply screams:

Enda CurranGlobal Economy Reporter

06/12 09:34 ET
Expectations for Fed rate cuts have changed rapidly in just
a few days. At the end of last week, traders had all but ruled
out a September reduction and the possibility of two quarter-
point cuts by year-end following an employment report that blew
past all estimates.

Now that we’ve gotten more evidence that inflation is
moderating, September is back in play as the timing for the
first cut and markets are back to pricing close to two
reductions by the end of 2024.

Kristine AquinoMarkets Live Managing Editor

06/12 09:34 ET
From BE’s US team:
“May’s soft core CPI reading should reassure the Fed that
inflation is slowing. Disinflation was broad across both goods
and services categories.

“We expect core CPI prints over the summer to proceed at a
mostly similar pace. With three more moderate prints in hand by
the time of the September FOMC meeting, we think Fed officials
will be convinced to start cutting rates then.”
Read BE’s updated take here:
Soft Core CPI Makes a Case for September Rate Cut
Michael ArnoldBloomberg Economics Editor

06/12 09:34 ET
OUR MAIN STORY: A key measure of underlying US inflation
stepped down for a second month in May, a pleasant surprise for
Federal Reserve officials looking for signs that they can start
to lower interest rates, writes Bloomberg’s Augusta Saraiva.
The figures, taken with the deceleration in the core CPI in
April, may represent the early stages of inflation resuming a
downward trend. But policymakers have stressed that they’d need
to see several months of price pressures receding before they
consider lowering interest rates, especially with the latest
jobs report reigniting the debate over how restrictive policy
actually is.
Read the rest here:
US Inflation Broadly Cools in Encouraging Sign for Fed
Andrew DunnTOPLive Editor

06/12 09:35 ET
FED BLOG: Join us on TOPLive later today for the Fed rate
decision and Jerome Powell’s news conference. The blog starts at
1:45 p.m. New York time and can be found here.
Andrew DunnTOPLive Editor