Reuters
4 min read
NEW YORK (Reuters) -U.S. consumer prices rose slightly in May as gasoline prices remained subdued, but inflation is likely to pick up in the months as tariffs boost the cost of imported goods.
The consumer price index CPI increased 0.1% last month after rising 0.2% in April, the Labor Department said on Wednesday. Economists polled by Reuters had forecast the CPI would rise 0.2%. Year on year, the CPI climbed 2.4%, vs a 2.3% rise in the 12 months through April.
Excluding the volatile food and energy components, the CPI rose 0.1% after gaining 0.2% in April. The so-called "core" CPI inflation increased 2.8% on a year-on-year basis in May after rising 2.8% in April.
Inflation data has been slow to reflect U.S. President Donald Trump's slew of tariffs as retailers are selling merchandise that was built up before the levies took effect.
MARKET REACTION:
STOCKS: U.S. stock index futures erased earlier declines and were last up 12 points, or 0.2%, pointing to a modestly higher open on Wall Street
BONDS: The 10-year U.S. Treasury yield fell 4.2 basis points to 4.432% while the two-year yield declined 6.5 basis points to 3.947%
FOREX: The dollar index reversed modest gains and was off 0.2% to 98.76 while the euro was up 0.39% at $1.1467
COMMENTS:
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK:
"We had good news on the inflation front. It came in lower than expected, and I guess the key point is there is still no trace of Trump's tariffs impacting inflation for the moment. However, I don't think it will change the tone of the Fed... but in terms of imminent news, this is good and positive for the markets."
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN:
"The post from Trump about the trade deal with China threatened to suck the air out of the importance of this CPI number. A 55% tariff on China does not seem like a good deal for households and businesses in America, but it was slightly better than the 60% tariff platform he campaigned on.
"The CPI number was a lot tamer than expected. A lot of imported food items had relatively high inflation, like bananas rising 3.3% in price and toy prices rising 2.2%. Egg deflation is taking place with prices falling 2.7%. A little stability with trade policy could go a long way to help keep inflation from derailing. This is another example of why the Fed may shift its balance of risks to focusing more on growth threats than inflation threats."
SLAWOMIR SOROCZYNSKI, HEAD OF FIXED INCOME, CROWN AGENTS INVESTMENT MANAGEMENT, LONDON:
