Jun 12 • General discussion
Inflation Rate Outlook
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This week's CPI report tells two very different stories depending on which number you read. The headline — 4.2% annual inflation, the highest since April 2023 — sounds alarming, but it's almost entirely an energy story: gas is up 40.5% year-over-year and accounted for over 60% of May's increase. Strip that out, and core CPI rose just 0.2% (below estimates), with shelter costs decelerating and core goods actually falling. Markets reacted fast — odds of a Fed rate hike by year-end jumped from 14.4% to 66.6% in a month — but Fed Governor Bowman is already warning against hiking in response to what looks like a war-driven, transitory spike. Meanwhile gas prices have already dropped ~$0.30/gallon from their peak, though that relief still hinges on the Iran situation. Bottom line: despite the scary headline, pending sales (75,935), purchase apps (+7% YoY), and May existing home sales (highest since December) all show buyers moving anyway. The Fed meets Monday — Warsh's first meeting, dot plot drops Wednesday.
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Inflation Rate Outlook
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