🔥U.S. inflation highest in 3 years - officially surpassing 4%.


📌Headline CPI:
🔸CPI for May +4.2% YoY, in line with forecasts, higher than the +3.8% of the previous month - the first time CPI exceeds 4% since April 2023.
🔸Monthly, CPI +0.5% MoM, in line with forecasts and lower than the +0.6% of the previous month.
📌Core CPI:
🔸Core CPI increased 2.9% YoY, in line with forecasts, higher than 2.8% last month and the highest in 9 months.
🔸However, monthly, core CPI only rose 0.2% MoM, below the 0.3% forecast and significantly down from 0.4% last month.
-> Data is quite noisy, but a bright spot is that the increase has slowed compared to the previous month.
📌The main driver of this month's inflation is energy. Energy rose +3.9% MoM in May, continuing the +3.8% increase from April. This group alone contributed over 60% of May's CPI increase. Among them:
🔸Gasoline +7.0% MoM and 40.5% YoY
🔸Fuel oil +3.8% MoM and 58.9% YoY
🔸Airline fares +2.7% MoM and 26.7% YoY
🔸Electricity +0.6% MoM and 5.9% YoY
📌What the Fed cares about is inflation expectations. If the Fed believes that CPI is only temporarily affected by energy prices, then raising interest rates might not be a concern. However, Kevin Warsh has only been on the Fed board for a few weeks, and his policy stance is not yet clear, so this remains an open question.
GAS0.09%
FUEL0.66%
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