The May inflation report is expected to show little change from the previous month, but could provide additional evidence that the high inflation seen in the first quarter has subsided. While April’s report showed a cooler inflation rate, economists predict a modest 0.1% growth in prices for May due to falling gas prices and low food prices. However, the annual rate is expected to remain steady at 3.4%, based on FactSet consensus estimates.
Core CPI, which excludes food and energy prices, is anticipated to increase by 0.3% for the second consecutive month. This would lower annual core inflation from 3.6% to 3.5%, which would be a three-year low. The biggest challenge to slowing CPI remains in shelter inflation, with analysts waiting to see when the moderation in market-rate rents will impact the inflation gauge.
Overall, while there may be some positive signs of moderating inflation from the May CPI data, it may not be enough to prompt a rate cut before September. Scott Anderson, chief economist with BMO, believes that while there may be encouraging evidence of inflation easing, it will not be definitive enough to warrant a rate cut in the near future.”
