Today’s inflation report is expected to show no significant slowdown, but could provide additional evidence that the high inflation seen in the first quarter has subsided. While April’s report showed a cooler inflation rate, economists are predicting a modest 0.1% growth in prices for May due to falling gas prices and low food prices. The annual rate is expected to remain steady at 3.4%, based on FactSet consensus estimates.
Core CPI, which excludes food and energy prices, is anticipated to increase by 0.3% for the second consecutive month. This would lower annual core inflation from 3.6% to 3.5%, which would be a three-year low. The biggest challenge to slowing CPI remains in shelter inflation, with analysts waiting to see when the moderation in market-rate rents will impact the inflation gauge.
Overall, the May CPI data is expected to provide some positive signs of moderating inflation, but it may not be enough to prompt a rate cut before September. Scott Anderson, chief economist with BMO, believes that while there may be encouraging evidence of inflation easing, it will not be definitive enough to warrant a rate cut in the near future.