Strategist: US Inflation Remains Elevated, but Cooling Core Data Gives Fed Room to Breathe

According to MSX.COM data, US stock memory chip stocks fell broadly, with Broadcom down over 2%, Nvidia, AMD, and ASML down over 1%, and Intel's stock price down 0.58%.

Odaily Odaily Planet Daily reports that, according to the CME "FedWatch," the probability of the Fed maintaining the current interest rate in June is 96.3%, while the probability of a cumulative 25-basis-point rate cut is 3.7%. The probability of the Fed keeping rates unchanged in July is 86.%, the probability of a cumulative 25-basis-point rate hike is 10.3%, and the probability of a cumulative 25-basis-point rate cut is 3.3%.

Odaily reported that the U.S. core CPI rose 0.2% month-on-month in May, below the market expectation of 0.3%. U.S. Treasuries strengthened slightly, while bond traders maintained their bets that the Federal Reserve will raise interest rates by the end of the year. The data is seen as relieving some pressure on the Fed ahead of Kevin Warsh’s first meeting as Fed Chair next week.

Following the CPI release, most U.S. Treasury yields fell by less than 1 basis point. The two-year Treasury yield, which is more sensitive to near-term monetary policy changes, stood at 4.11%, down from around 4.13% earlier in the session. Dan Carter, senior portfolio manager at Washington Fort Investment Advisors, said, “This gives the Fed a little breathing room.” (Jin Shi)

Odaily reported that "Fed Whisperer" Nick Timiraos noted that it should not be overlooked that the overall CPI rose 0.47% month-over-month (an annualized increase of 5.8%), pushing the unadjusted annual CPI rate to 4.2%, a three-year high. On a three-month annualized basis, CPI rose 8.2%.

Odaily reported that US CPI data for May showed inflation surging to a three-year high, but the moderate rise in core prices has alleviated Wall Street's concerns about interest rate hikes.

Today's CPI data and tomorrow's PPI figures are expected to influence the Federal Reserve's policy stance, which will be announced a week later when Kashkari chairs the Fed meeting for the first time. According to the CME FedWatch, before the release of the CPI inflation data, the market had already priced in a 70% probability of the Fed raising interest rates by the end of 2026.

However, the market believes that a rate hike at next week's Fed meeting is almost impossible, with the probability of a rate hike at the July meeting standing at just 13%. The short-term focus lies on whether the Fed will clearly shift from an accommodative stance to a neutral or tightening stance at its upcoming meeting. This week's CPI and PPI inflation data, along with progress in US-Iran negotiations, could influence the balance between neutrality and tightening. (Jinshi)

Odaily reported that U.S. consumer prices rose at the fastest pace in three years in May, as the conflict in the Middle East pushed up prices for gasoline and other energy products, providing further justification for the Federal Reserve to keep interest rates unchanged through 2027.

Data released on Wednesday showed that in the 12-month period ending in May, the CPI rose 4.2% year-over-year, the largest increase since April 2023. Compared to the previous month, prices rose 0.5% month-over-month, following a 0.6% increase in April. The third consecutive month of sharp CPI increases highlights the growing pressure on households, as there are signs that more consumers are dipping into their savings to cover expenses.

Furthermore, inflation has outpaced wage growth for the second consecutive month, which could negatively impact overall economic growth. At the same time, the sharp rise in the cost of living represents a significant political burden for President Trump and his party, as they attempt to maintain control of Congress in the November midterm elections.

John Briggs, Head of U.S. Rates Strategy for North America at Natixis, said that the core inflation monthly rate was slightly more moderate than expected, which may help solidify the argument that the peak of war-related inflation may have passed, and the inflation outlook could improve in the future. Of course, this depends on oil prices remaining stable going forward. (Jin10)

Odaily reported that short-term interest rate futures show the market has reduced its bets on the Federal Reserve raising interest rates. US and Brent crude oil prices remain largely unchanged, at $89.76 per barrel and $91.85 per barrel respectively. Spot silver briefly surged over $1.5, reaching $64.90 per ounce. (Jin Shi)

Odaily News: The U.S. core CPI (unadjusted) for May recorded an annual rate of 2.9%, in line with market expectations, reaching a new high since September 2025. Spot gold briefly surged by about $20 to $4,166.85 per ounce. (Jinshi)

According to Odaily, the U.S. May seasonally adjusted CPI month-on-month rate stands at 0.5%, compared with an expected 0.50% and a previous reading of 0.60%. (Jin10)