US CPI Preview: Root Causes of Inflation Go Far Beyond Oil, Stickiness May Not Fade Quickly

Odaily Odaily News Market expectations for the US May headline CPI annual rate are for it to rise to 4.2% (prior 2.4%), with the monthly rate expected to fall to 0.5%. This would mark the first time CPI has exceeded 4% since May 2023 and represent the highest reading since April 2023. The rise in headline inflation is primarily attributed to energy costs pushed higher by the Iran war. However, the core CPI annual rate, which excludes food and energy, is also expected to rise to 2.9%, with the monthly rate falling to 0.3%. There are growing concerns that inflation is spreading: rising oil prices are feeding through to various sectors of the economy, and inflation may not dissipate quickly. Liz Ann Sonders, Chief Investment Strategist at Charles Schwab, stated: "This is not just an oil issue; it also involves the money supply and is increasingly related to AI. The inflation problem is broader than just energy, implying that inflation may remain sticky." She noted that investor nervousness primarily stems from inflation, and if data worsens more than expected, the stock market will come under pressure. The Trump administration believes inflation will retreat after the Middle East conflict subsides. However, Sonders believes supply has been severely disrupted, "Even if the war ends quickly, it will be difficult for oil prices to return to their previous lows. This is not a problem that can be fixed with a reset button." (Jinshi Data)