May US CPI: A Chill in Prices, Not a Hot Shift
Last month’s CPI surprises the FOMC (Federal Open Market Committee) with a bit of reassuring news—headline inflation didn’t budge at all, a smooth ride back toward the lofty 2% target since June 2023.
Headline CPI—No Momentum, No Rush
- The headline number stayed flat from month to month.
- It’s the first time we’ve seen that steadiness in a whole year.
- Think of it as the market’s “everything is chill” sigh.
Core CPI Hits a Three‑Year Lows—Cool, Cool, Cool
- Core inflation slid to 3.4% on a yearly basis.
- That’s the lowest it’s been for over three years.
- The “core” metric strips out the weather‑dependent fluff—like food and energy—to give us a cleaner view.
Will the FOMC Jump the Rate‑Cut Trampoline?
Even though prices seem to be cooling, a single data point isn’t enough to yank the levers just yet. The next FOMC meeting is tonight, so the committee will weigh the full set of economic clues before deciding.
We can’t expect an immediate “hand‑on‑the‑march” cut, but this data does shine a light that a hawkish announcement is less likely. A rent‑free plane of significant cuts is still high above the clouds.
What Market‑Jews Think: 2 Cuts, 2 Beats
- Most traders are betting on two cuts this year.
- First cut: September, 25 bp (basis points).
- Second cut: December, another 25 bp.
- We call this the “bite‑the‑stick” strategy.
Note: the “dot plot”—the Treasury’s visual favourite—now anchors itself at a 50 bp median expectation for cuts, down from 75 bp last %whisper.
Bottom Line for the Neighbours of the FOMC
- Inflation’s deceleration isn’t a headline noir—just a gentle dip.
- Rate cuts are still a two‑step dance rather than a single pirouette.
- Hope for a smoother ride to the 2% target is gaining traction, though the finish line isn’t over yet.
Stay tuned—because in the world of monetary policy, a single coffee break can change everything.
