Global investors keep a close eye on US CPI data as a key indicator of the economy. Although US inflation dropped from a peak of 9.1% in June 2022 to 3.4% in April 2024, the US central bank is still concerned about the stickiness. US CPI has been hovering around 3.2% over the last 6-8 months. The US Fed has stated unequivocally that the rate cut will not happen until the US CPI drops to 2%.

The Bureau of Labor Statistics releases May 2024 CPI data on June 12, 2024, at 8:30 A.M. Eastern Time.

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In April, the US CPI increased by 0.3 percent on the monthly count while annual inflation rose by 3.4%, a smaller increase than the 3.5-percent increase for the 12 months ending March. The core inflation index (all items less food and energy) rose 0.3 percent in April, while the annual core inflation index rose 3.6 percent over the past 12 months.

Forecasters predict a May inflation report showing minimal consumer price increases, primarily due to falling gasoline prices. This could lead to the Federal Reserve cutting interest rates later in the year, though the data alone is unlikely to trigger such a cut.

It is anticipated that prices will climb by 0.1% in May, which would be the lowest increase since October after rising by 0.3% in April. In other words, prices increased 3.4% annually, which is the same rate as they did in April.

Therefore, the latest expectations on the consumer price index show that May inflation is likely to be down slightly from April but the year-over-year number holding steady at 3.4%. The core index, leaving out food and energy costs, is expected to decline to 3.5% from 3.6%.

The Federal Reserve may consider cutting its key interest rate later this year if cooler inflation continues, as progress on cooling inflation appears to have resumed in the second quarter.

The Federal Reserve is seeking economic data, particularly inflation reports, to confirm consumer prices are on track to a 2% annual rate before cutting interest rates. The central bank has maintained its key fed funds rate at a 23-year high since July, aiming to slow the economy and curb inflation.

US Fed’s FOMC meeting is underway and the Federal Reserve Chief Powell is expected to announce no change in the policy rates on June 12 at 8 PM ET.