#BREAKING: US CPI came in at 4.2% year over year in May. Exactly what Wall Street expected. No surprise there.

But Core CPI month over month printed 0.2%. That is a miss. Forecast was 0.3%. Previous was 0.4%.
Here is why that matters.
Core CPI strips out food and energy. It is the number the Fed actually watches when making rate decisions. A miss to the downside means underlying inflation pressure is cooling faster than expected.
The headline number looks ugly at 4.2%. Up from 3.8% last month. But that jump is almost entirely driven by oil and energy costs from the Iran conflict. The Fed cannot control oil prices by raising rates.
What they can control is everything else. And everything else just came in softer.
Two scenarios from here.
The ceasefire between Iran and Israel holds. Oil drops. The next CPI print comes in below 4%. Fed cuts in September as originally planned. Risk assets recover hard.
Or the conflict reignites. Oil spikes again. Headline CPI goes to 4.5% or higher. Fed is forced to hike in December. Everything stays under pressure.
Core CPI at 0.2% just gave the Fed a small window to breathe.
Whether they use it depends entirely on what oil does this week.
Rest. #DYOR