Χ The CPI rose 1% from the previous month and 8.6% from last year, compared to inflation rates of 8.3% in April and 8.5% in March. The base CPI, which removes volatile food and energy categories, rose 0.6% from April. However, annual structural inflation fell to 6% from 6.2% in the previous month. Core inflation of 6.5% in March was the highest since August 1982. Economists expected the total CPI to increase by 0.7% on a monthly basis as the annual CPI inflation rate fell to 8.2%. The base CPI increased by 0.5% compared to April and 5.9% from a year ago. Inflation of non-energy services, which affects 57% of consumer budgets, increased by 5.2% compared to a year ago, exceeding the high of 30 years in April, by 5.1%. Prices of goods, excluding food and energy, rose 0.7% on a monthly basis, reducing the annual inflation rate to 8.5% from 9.7% in April. Economists have been waiting for commodity prices to fall. However, a significant reduction in utility inflation will be needed to adjust the US Federal Reserve. The monthly increase of 0.6% of the key consumer price index, if maintained, would amount to an annual core inflation rate of 7.2%. This compares with the Federal Reserve’s forecast of 4.1% structural inflation in 2022. If inflation remains at a pace beyond the Fed’s targets, policymakers will probably have to tighten further and faster than expected. Note that the CPI differs from the Fed’s preferred personal consumption price index. The latter includes government markets on behalf of consumers, such as Medicare and Medicaid. It also affects the substitution phenomenon, when high prices lead consumers to adjust to buying behavior.
Dow Jones, Reasury Yields Reaction to CPI Inflation Rate
The Dow Jones Industrial Average fell 2.4% early on Friday in stock trading. The S&P 500 sank 2.6% and the Nasdaq composite 3.1%. It remains to be seen whether inflation, which is beginning to decline from its peak, can create a sustainable rally. Make sure you read the IBD column The Big Picture after each trading day to get the latest information on stock market trends and what it means for your trading decisions. Markets have been in turmoil lately, with milder economic data boosting hopes for an impending change in Fed policy. However, messages from the US Federal Reserve, including a warning to head Jerome Powell of “pain in the front”, suggest that there is no delay from the Fed tightening. Friday’s CPI figures certainly added weight to the bear’s case. The Federal Reserve is expected to raise interest rates by 50 basis points at next Wednesday’s policy meeting. Another half-point increase is expected in July. However, after the CPI report, the CME Group’s FedWatch page shows overwhelming chances for additional increases of at least 50 basis points in the June, July and September meetings, with slightly better than even chances of a half point increase in November. This would bring the Federal Reserve target range to 2.75% -3%, from 0.75% -1% at present. Since closing on Thursday, the Dow has fallen 12.3% from a record high on January 4. The S&P 500 was down 16.2% from its highest point, while the composite Nasdaq was down 26.8%. Following the CPI report, the yield on the 10-year bond increased by 7 basis points to 3.10%. The two-year yield fell 14 basis points to 2.96%.
CPI Inflation Report Data
Prices for used cars and trucks jumped 1.8% on a monthly basis and increased by 16.1% from last year. However, this compares with the annual profit of 35.3% in March. Demand for used cars has soared amid a global chip shortage that has plagued new car production. Prices for new vehicles increased by 1% on a monthly basis, while they increased by 12.6% compared to last year. The 13.2% annual increase in April was the largest annual increase since 1949. Energy prices increased by 3.9% on a monthly basis and increased by 34.6% compared to last year. Gasoline prices have hit new highs in recent days. Prices for food outside the home rose 0.7% in May compared to April, up 7.4% from a year earlier. Prices of food consumed at home increased by 1.4% last month and 11.9% compared to a year ago. Prices for medical services increased by 0.4% on a monthly basis, bringing the annual increase to 4%. Meanwhile, shelter prices rose 0.6% in May, as the owners’ respective rents rose 0.6%. YOU CAN ALSO LIKE: The best growth stocks for buying and monitoring Why this IBD tool simplifies the search for top stocks Catch the next big payout with MarketSmith Do you want to make quick profits and avoid big losses? Try SwingTrader
