US inflation softer than expected in May as tariffs show limited impact
Make us a preferred source
Make us a preferred source on Google
The news: US consumer prices increased less than expected in May, with the Consumer Price Index rising 0.1% for the month and 2.4% over the year, according to the Labor Department.
The numbers: Core CPI, which excludes food and energy, also rose 0.1% and 2.8% annually. Cheaper gasoline, used cars, airfares and apparel helped offset higher shelter, healthcare and grocery costs.
Economists polled by Reuters had expected a 0.2% monthly CPI rise and a 2.5% annual increase.
Bond yields fell after the data, led by shorter maturities, with two-year Treasury yields dropping below 4% as traders boosted bets on a September Fed cut to around 75%, up from expectations for an October move. They were also pricing in about two reductions by year-end. The S&P 500 was 0.11% higher.
The context: The subdued inflation marks the fourth month of softer-than-forecast core CPI and reflects limited pass-through of tariffs to consumers so far.
The report showed limited signs of price increases driven by tariffs, though categories exposed to tariffs like toys and major appliances recorded their biggest price increases in years, according to Blomberg.
The sources: US Bureau of Labor Statistics, Bloomberg
