MNI US CPI Preview: Incremental But Insufficient Progress

EXECUTIVE SUMMARY

• Sequential core inflation is seen remaining relatively steady in May at 0.3% M/M (median; 0.28% average unrounded) vs 0.29% in April, per MNI’s compilation of sell-side previews.
• Headline CPI is expected to pull back fairly sharply to 0.1% (median; 0.12% average unrounded) vs 0.31% in April, owing largely to a drop in energy/gasoline prices on a seasonally-adjusted basis.
• Both core services and core goods inflation prints are seen relatively steady versus April, with owners’ equivalent rent (OER) and rents at around 0.4% M/M each, used car and lodging prices rebounding, and car insurance inflation cooling slightly but still very high.
• This outcome should likewise keep “supercore” (core services ex-shelter) inflation fairly steady also around 0.4%, albeit with a decent dispersion of analyst expectations (0.36-0.46%).
• With the release coming only hours before the FOMC releases its June decision and updated economic projections, the result could impact the Fed’s messaging, if not the Dot Plot.
• The consensus outcome would provide limited relief for the Committee that at least inflation isn’t reaccelerating in the way nonfarm payrolls did in May, even if it suggests that inflation is stalling out at above-target levels.
• A softer-than-expected reading (particularly if seen translating into PCE terms) would arguably mark a second consecutive month of “confidence”-building that inflation is converging with 2%. An upside miss however could reset the clock on building that confidence, pushing back market cut pricing even further back beyond September.

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USCPIPrevJun2024.pdf