The May consumer price index (CPI) report showed a modest increase in inflation, with both the headline and core CPI rising by 0.1% from the previous month. Core inflation, which excludes food and energy, remained at a year-on-year pace of 2.8%, its slowest since spring 2021.
A decline in gasoline prices was the main driver of the muted inflation increase, while shelter costs saw a significant boost. Airfares, cars, and clothing also experienced declines, contributing to the tame reading.
Economists had predicted tariff hikes would appear in the CPI but instead saw no impact. Some speculate businesses may be holding off on price increases to avoid future tariffs. This reading poses a challenge for the Federal Reserve to justify its decision not to lower interest rates.
The news sparked a positive reaction in financial markets, with stock futures and Treasury yields rising. Interest-rate futures indicated two possible rate cuts this year, while the dollar dipped.
Source: https://www.bloomberg.com/news/live-blog/2025-06-11/us-cpi-report-for-may