May CPI release is crucial ahead of June 17 Fed decision
The upcoming US May CPI release is a critical test for the Federal Reserve ahead of its June 17 meeting. A hot print would reinforce the rate hike narrative, with money markets already pricing a near-certain 25 basis-point increase by December.
The May jobs data came in well above forecasts, effectively extinguishing rate cut expectations. Analysts say a stronger-than-expected CPI print will make it difficult for policymakers to argue for further easing, given inflation is already running above the Fed’s 2% target.
Energy price passthrough into broader consumer prices is a key watch point in this week’s releases. The CPI and PPI figures will provide key inflation inputs ahead of the Fed’s decision, with money markets pricing a 98% probability of a rate hike by December.