US CPI Preview: Forecasts from eight major banks for critical May inflation

The US dollar is at the upper end of its range ahead of the release of US Consumer Price Index figures at 12:30 GMT. As we get closer to the release time, here are the expectations as forecast by the economists and researchers of eight major banks, regarding the upcoming US inflation data. After April's jump, headline inflation is forecast to accelerate to 4.7% YoY and a 5% read could trigger a substantial upside move in the greenback. Core CPI is set to rise to 3.5% YoY. 

See – US CPI May Preview: Inflation angst is coming


“We expect the core index to have gained 0.3% MoM. As a result, the annual core inflation rate could move up from 3.0% to a 28-year high of 3.3%. Headline prices could also have risen 0.3% MoM, helped by a slight increase in seasonality-adjusted gasoline prices. This gain, combined with a positive base effect, should allow the annual rate to rise from 4.2% to 4.5%, the highest figure recorded since September 2008.” 


“The recovery in sectors impacted the most by the pandemic, including air travel and hotels, likely saw prices increase rapidly again in May, taking them closer to pre-pandemic levels. Strong demand in goods categories amidst supply chain issues, and in-service sectors that are facing worker shortages likely added to price pressures. Used car prices also appear to have posted a lofty rise, which would combine with the latter factors to result in a 0.4% monthly advance in core CPI, taking annual core inflation up to 3.4%. The annual figure is, however, magnified by year-ago weakness. When adding food and energy prices back into the mix, total CPI likely advanced by 0.3% on the month, as the seasonal adjustment process likely wiped away the observed rise in gasoline prices. That would leave total inflation at 4.6%, which would again have been exaggerated by base effects.”


“Strength in travel items, most notably used vehicles, airfares and lodging, likely led to another strong rise in core prices, albeit not quite as strong as in April. We advise against extrapolating, but the data will keep alive the "transitory" debate. The boost from base effects will peak with this report; we forecast 4.8%/3.6% YoY for total/core prices, up from 4.2%/3.0%.”

RBC Economics

“Headline US CPI is expected to have remained above 4% in May, distorted in part again by the recovery in energy prices. Though similar to April, a shortage of used cars and more demand for air travel are expected to continue to push up prices for transportation in May.”

Deutsche Bank

“We are of the view (shared by the Fed’s leadership) that this current episode is likely to prove temporary thanks to one-off factors such as those associated with the economic reopening and base effects. Indeed, the strength in core CPI last month was largely due to categories at the epicentre of the covid pandemic, where there were likely severe supply/demand imbalances related to reopening or stimulus-boosted demand. We see a similar theme in the May core CPI release, where they’re forecasting a +0.5% MoM increase (vs. +0.9% previously), while our expectation for the headline CPI is similarly for a +0.5% monthly increase (vs. +0.8% previously).”


“We do not expect the surge in core prices in April to be repeated in full, but continued rapid growth in prices for the likes of used vehicles and airfares points to another outsized increase, of about 0.6% MoM. That would be enough to push core CPI inflation up to 3.7%, a 28-year high, although we doubt that would shift the Fed’s belief that higher inflation will prove transitory.”


“This week we are likely to see consumer price inflation rise further – our forecast is 4.8% YoY for May with core (ex-food and energy inflation) rising to 3.3% from 3%. For the former, this would mark the highest inflation reading since 2008 – when oil prices surged to $146/barrel – while for the core rate it would be the strongest reading since 1993! This should mark the peak in inflation, though, given much of it is being driven by comparing price levels in a vibrant reopening economy versus those of twelve months ago, when there were sharp falls in prices across the board as companies desperately sought cash. Nonetheless, supply chain issues, rising commodity prices, labour market shortages and rising house prices suggest to us inflation could remain more elevated and be more persistent than the Federal Reserve is publicly forecasting. This is a key factor why we think the Fed will raise the interest rate sooner than 2024.”


“We expect US core inflation to rise by 0.5% m/m (3.5% YoY) in May. A significant upside surprise in inflation could tilt the Fed taper discussion to sooner rather than later.”


Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

GME stock positioned for another short squeeze

Get the full analysis and chart in our Insights. Upgrade to Premium today    

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD looks depressed below 1.2200 ahead of ECB, US inflation

EUR/USD remains on the back foot below 1.2200 ahead of a busy docket. The US dollar shrugs off weaker Treasury yields. The ECB eyed for economic outlook. The US CPI needs stronger-than-forecast print to keep the dollar afloat.


GBP/USD remains poised to drop below 1.4100, US CPI eyed

GBP/USD treads water above 1.4100 ahead of the London open. The US dollar remains steady and exerts pressure on the pair. Brexit concerns, Delta strain added to the British pound struggle. US inflation awaited.


XAU/USD off lows, not out of the woods yet ahead of US inflation

Gold price is attempting a minor bounce, having witnessed a steep drop following a break below the critical 21-DMA support at 1883. At the time of writing, gold price is trading 0.50% lower at $1880, looking to recapture the 21-DMA.

Gold News

Three reasons why Shiba Inu price may be ready to rally

Shiba Inu price decline has not been matched by increasing volume, suggesting it is not token specific. ShibaSwap decentralized cryptocurrency exchange (DEX) in testing mode, to be released to the public soon. Social volume stabilizes during another period of price weakness. 

Read more

US CPI May Preview: Inflation angst is coming

When the Federal Reserve moved its price measurement to inflation averaging last September the governors were carefully insulating rate policy from this year’s expected acceleration in consumer costs. 

Read more