Bill Diviney, senior economist at ABN AMRO, points out that the US CPI inflation printed to the downside in May, with the core measure rising 0.1% mom (ABN/consensus: 0.2%), marking its fourth downside surprise so far this year.
“Annual inflation came in at a healthier 2.0% yoy, albeit still below our and consensus expectations (2.1%).”
“The weakness was driven by similar factors behind previous weak prints – apparel (which is being affected by a methodological change), drugs (affected by increased approval of generics), and used cars (caused by a supply glut). As a result, momentum in core inflation – the 3m/3m annualised rate – fell to just 1.7% in May, the lowest since mid-2017 when inflation was reduced by the fall in mobile phone tariff rates.”
“While Fed Chair Powell has been rather dismissive of the weakness in inflation, pointing for instance to the Dallas Fed’s trimmed mean measure (which has been relatively stable near 2% annualised), the ongoing weakness in inflation bolsters the case for the Fed to ease monetary policy given the weaker growth outlook and falling market-based measures of inflation expectations.”
“We continue to expect the Fed to cut rates three times by Q1 2020, starting at the July FOMC meeting.”
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.