| Consensus | Consensus Range | Actual | Previous | |
|---|---|---|---|---|
| CPI - M/M | 0.2% | 0.1% to 0.3% | 0.1% | 0.2% |
| CPI - Y/Y | 2.5% | 2.4% to 2.5% | 2.4% | 2.3% |
| Ex-Food & Energy- M/M | 0.3% | 0.0% to 0.5% | 0.1% | 0.2% |
| Ex-Food & Energy- Y/Y | 2.9% | 2.8% to 3.0% | 2.8% | 2.8% |
Highlights
The cooler-than-expected May inflation data reflects momentary calm before price increases due to tariffs from mid-2025 onwards. The Federal Reserve will be encouraged by this data, but it is unlikely to shift the central bank out of its wait-and-see mode until it has greater certainty that the tariffs will not have a broad and sustained inflationary impact.
The Consumer Price Index in May slowed to +0.1 percent, following a 0.2 percent rise in April, and a 0.1 percent decline in March. This compares to expectations for a 0.2 percent rise in the Econoday survey of forecasters. The slowdown in the pace of consumer price continues after a steep rise in the CPI between November 2024 and January 2025.
Over the last 12 months, consumer prices are up 2.4 percent, compared to a 2.3 percent year-over-year rise in April. Expectations in the Econoday survey were for a 2.5 percent increase.
Core CPI, excluding food and energy prices, are up by 0.1 percent, after rising by 0.2 percent in April, and +0.1 percent in March. Consumer prices less food and energy rose 2.8 percent from May 2024, matching the rate of increase on an annual basis in April, and just under the 2.9 percent consensus in the Econoday survey.
After rising by 0.3 percent in April, shelter costs rose by the same rate again in May (and are up 3.9 percent year-over-year). Food prices rebounded by 0.3 percent, erasing a 0.1 percent dip in April, as grocery prices rose 0.3 percent last month, and restaurant prices also rose by 0.3 percent.
Energy costs fell 1 percent over the month, dragged down by a 2.6 percent drop in gasoline prices.
Energy prices are down 3.5 percent year-over-year, following a 3.7 percent slide for the 12 months ending April. Food prices increased 2.9 percent compared to May 2024, following a 2.8 percent rise in April.
The Consumer Price Index in May slowed to +0.1 percent, following a 0.2 percent rise in April, and a 0.1 percent decline in March. This compares to expectations for a 0.2 percent rise in the Econoday survey of forecasters. The slowdown in the pace of consumer price continues after a steep rise in the CPI between November 2024 and January 2025.
Over the last 12 months, consumer prices are up 2.4 percent, compared to a 2.3 percent year-over-year rise in April. Expectations in the Econoday survey were for a 2.5 percent increase.
Core CPI, excluding food and energy prices, are up by 0.1 percent, after rising by 0.2 percent in April, and +0.1 percent in March. Consumer prices less food and energy rose 2.8 percent from May 2024, matching the rate of increase on an annual basis in April, and just under the 2.9 percent consensus in the Econoday survey.
After rising by 0.3 percent in April, shelter costs rose by the same rate again in May (and are up 3.9 percent year-over-year). Food prices rebounded by 0.3 percent, erasing a 0.1 percent dip in April, as grocery prices rose 0.3 percent last month, and restaurant prices also rose by 0.3 percent.
Energy costs fell 1 percent over the month, dragged down by a 2.6 percent drop in gasoline prices.
Energy prices are down 3.5 percent year-over-year, following a 3.7 percent slide for the 12 months ending April. Food prices increased 2.9 percent compared to May 2024, following a 2.8 percent rise in April.
Market Consensus Before Announcement
Headline inflation is expected up 0.2 percent on month and 2.5 percent on year in May versus a rise of 0.2 percent and an increase of 2.3 percent on year in April. Core CPI is seen up 0.3 percent and 2.9 percent in May versus 0.2 percent and 2.8 percent in April. This is the key report for the week as everyone wants to know how tariffs are affecting prices.
Definition
The CPI is a measure of the change in the average price level of a fixed basket of goods and services purchased by consumers. Monthly changes in the CPI represent the rate of inflation for the consumer. Annual inflation is also closely watched.
The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.
The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.
The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.
The consumer price index is available nationally by expenditure category and by commodity and service group for all urban consumers (CPI-U) and wage earners (CPI-W). All urban consumers are a more inclusive group. The CPI-U is the more widely quoted of the two, although cost-of-living contracts for unions and Social Security benefits are usually tied to the CPI-W, because it has a longer history. Monthly variations between the two are slight.
The CPI is also available by size of city, by region of the country, for cross-classifications of regions and population-size classes, and for many metropolitan areas. The regional and city CPIs are often used in local contracts.
The Bureau of Labor Statistics also produces a chain-weighted index called the Chained CPI. This measures a variable basket of goods and services whereas the regular CPI-U and CPI-W measure a fixed basket of goods and services. The Chained CPI is similar to the personal consumption expenditure price index that is closely monitored by the Federal Reserve Board.
Description
The consumer price index is the most widely followed monthly indicator of inflation. An investor who understands how inflation influences the markets will benefit over those investors that do not understand the impact.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments.
If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation as you know the $100 will not be able to buy the same amount of goods and services a year from now. The CPI tells us that prices rose 4.2 percent in the U.S. over 2007. To recoup your purchasing power, you would have to charge 4.2 percent interest. You might want to add one or two percentage points to cover default and other risks, but inflation remains the key factor behind the interest rate you charge.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
Inflation is an increase in the overall prices of goods and services. The relationship between inflation and interest rates is the key to understanding how indicators such as the CPI influence the markets- and your investments.
If someone borrows $100 dollars from you today and promises to repay it in one year with interest, how much interest should you charge? The answer depends largely on inflation as you know the $100 will not be able to buy the same amount of goods and services a year from now. The CPI tells us that prices rose 4.2 percent in the U.S. over 2007. To recoup your purchasing power, you would have to charge 4.2 percent interest. You might want to add one or two percentage points to cover default and other risks, but inflation remains the key factor behind the interest rate you charge.
Inflation (along with various risks) basically explains how interest rates are set on everything from your mortgage and auto loans to Treasury bills, notes and bonds. As the rate of inflation changes and as expectations on inflation change, the markets adjust interest rates. The effect ripples across stocks, bonds, commodities, and your portfolio, often in a dramatic fashion.
