MNI BRIEF: US May CPI Offers Fed Some Relief; Supercore Dips

U.S. CPI came in well below expectations in May, with headline nearly flat over the month and core up just 0.163%, compared to expectations for a 0.1% and 0.3% rise, respectively. Over the past 12 months, the increase in headline CPI slowed to 3.3% and core 3.4%, the Bureau of Labor Statistics said Wednesday. The 10-year Treasury yield fell 13 bps and the U.S. dollar slid to new weekly lows.

Shelter rose 0.4% for the fourth straight month, more than offsetting a 3.6% decline in gasoline. Core services outside of housing or "supercore" fell by 0.042% compared to its three-month average of 0.342%, according to an MNI calculation. Analysts had expected increases ranging from 0.3% to 0.5%.

The data should support the FOMC's view that disinflation has resumed after a sideways first quarter. Federal Reserve Chair Jerome Powell will lay out the committee's latest outlook after the two-day policy meeting concludes Wednesday afternoon. (See: MNI: Fed Dots Likely Split Between 1 And 2 Cuts This Year) Markets are still largely counting on the first rate cut to come in September or later.