May CPI Hits 4.2% as Fed Reassesses 75-Basis-Point Easing Path
Updated
Updated · yardeniquicktakes.com · Jun 17
May CPI Hits 4.2% as Fed Reassesses 75-Basis-Point Easing Path
3 articles · Updated · yardeniquicktakes.com · Jun 17
Summary
May headline CPI rose to 4.2% year over year, the highest since April 2023, while core CPI reached 2.9%, strengthening the case for the Fed to drop its easing bias.
Energy drove much of the acceleration: gasoline prices jumped 40.5% from a year earlier, pushing overall energy inflation to 23.5% amid the Persian Gulf war.
That inflation backdrop contrasts with late 2025, when the Fed cut rates three times by a total of 75 basis points as price pressures cooled and labor-market weakness grew.
Hiring has since picked up and unemployment has stayed low, suggesting the federal funds rate may no longer be restrictive as AI-led investment and lower household saving lift the neutral rate.
A US-Iran peace deal due Friday could reopen the Strait of Hormuz, and recent falls in petroleum prices may ease some of the energy pressure in coming months.