US May CPI +8.6% y/y vs 8.3% expected

  • Prior was 8.3% y/y
  • m/m reading +1.0% vs +0.7% expected and 0.3% prior
  • CPI index at 292.296 vs 291.661 prior
  • Full report

Core CPI:

  • y/y 6.0% vs 5.9% expected and 6.2% prior
  • m/m +0.6% vs +0.5% expected and +0.6% prior


  • CPI energy +3.9% vs -2.7% prior
  • Gasoline +4.1% vs -6.1% prior
  • New vehicles +1.0% vs +1.1% prior
  • Used vehicles +1.8% vs -0.4% m/m prior
  • Owners’ equivalent rent +0.6% m/m vs +0.5% prior
  • Food +1.2% vs +0.9% prior
  • Real weekly earnings -0.7% m/m

I suspect much of the risk-averse price action on Thursday was related to jitters ahead of this report but those jitters were confirmed. This is a terrible report with inflation rising 1.0% in the month in a broad-based way.

Ahead of the report, the Fed funds  futures  market was largely pricing in a path of 50/50/50/25 at the four upcoming meetings, starting with the June 15 get-together. The odds of a fourth 50 bps hike in November are now at 36% and the terminal rate at year end is just shy of 3.00%.

Right now, that pricing is tough to lean against. This is the last big data point before next week’s FOMC and Powell can’t come out and try to slow roll 8.3% inflation that’s increasing at 1% a month. US gasoline prices hit a new high yesterday so there’s more in the pipeline, even if that’s out of the FOMC’s control.

Stock futures have fallen sharply on this report (SPX -46) and the US dollar is higher with EUR/USD falling through 1.0550.

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