#ipc #fed
May CPI inflation should not bring many surprises and is unlikely to change the Fed's view
EUR/USD rebounds from support ahead of US CPI reading scheduled for 2:30 p.m.
The labor market remains strong, but despite this, inflation may confirm that the Federal Reserve remains on track to cut interest rates this year.
US core inflation expected to remain at 3.4% YoY and core inflation expected to fall slightly to 3.5% YoY
Market expectations
April inflation was the first publication this year that did not surprise with higher-than-expected readings. No big surprises are expected for the May release either, given several factors such as the further slowdown in rental inflation and the drop in fuel prices in recent weeks. Let's take a closer look at expectations and the key factors affecting inflation:
Core CPI inflation is expected to remain at 3.4% year-on-year, but is expected to be accompanied by monthly growth of just 0.1% and month-on-month growth of 0.3% in April.
The scenario of a reading of 0.3% month-on-month in the coming months points to stabilization. A reading of 0.1% monthly would be a step in the right direction that would ensure inflation is on target within the forecast period. On the other hand, core inflation is susceptible to fluctuations in food and energy prices.
However, core inflation is expected to slow to 3.5% year-on-year from 3.6% year-on-year, but in monthly terms is expected to continue rising at 0.3% month-on-month, slightly above the level desired by the Federal Reserve.