Egg prices are dropping and gas prices are down sharply from a year ago, but that likely won’t be enough to get the Federal Reserve to stop raising interest rates.
The consumer price index (CPI), due Tuesday morning, is expected to show overall 12-month inflation continued to slow in May but remain way too high for the Fed’s comfort. On average, economists expect CPI of 4.2%, more than twice the Fed’s goal for 2% inflation.
“Such figures, more than 2X the 2% inflation goal would suggest a data-dependent Fed would have to continue its rate hikes,” wrote economists at Action Economics.
When is the CPI report due?
May 2023 CPI data are scheduled to be released at 8:30 A.M. Eastern Time on Tuesday, June 13.
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What areas will see weak price growth?
Headline CPI will be held down by lower energy prices, economists said. Bank of America economists forecast a hefty 3% monthly decline in energy prices as gas prices declined in May. AAA data show average regular gasoline prices declined 2.1% month over month.
Consumers should also see a third consecutive decline in grocery prices “as costs associated with groceries-commodity prices, transportation, and storage-have continued to ease,” Bank of America economists said.
Adobe Analytics said on Tuesday its monthly online inflation survey grocery price increases slowed for the eighth consecutive month. In May, online grocery prices rose 0.3% monthly, or 8.2% annually. “Consumers are increasingly buying more of their groceries online, and this category has generally moved in lock step with the Consumer Price Index,” it said.
How Dow futures are trading before the CPI report?
Futures tied to the broad stock market gauge, the S&P 500 index, were up 0.07% at 4,345.75 early Tuesday morning, while futures connected to the blue-chip Dow were down 0.06% at 34,062 and the tech-laden Nasdaq-100 traded up 0.3% at 14,845.75.
What is CPI and what is core CPI?
CPI, short for the consumer price index, is an inflation gauge prepared by the Bureau of Labor Statistics each month. It measures the average change over time of what urban consumers pay for a market basket of consumer goods and services.
There are two main parts to CPI:
- Headline, or overall, CPI
- Core CPI, which excludes the volatile energy and food sectors
“Over the short term, the core measure may give a more accurate reading of where inflation is headed, but people do buy food, fill up their gas tanks, and heat their homes, so headline inflation more accurately represents people’s actual expenses,” according to the Cleveland Federal Reserve.
What do economists predict for CPI?
According to research firm FactSet, economists on average expect:
- May CPI is forecast up 0.2% in May after rising 0.4% in April.
- Core CPI up 0.4% for the month versus 0.4% in April.
- Year-over-year CPI is seen rising 4.2% in May after gaining 4.9% in April.
- Year-over-year core CPI is expected to rise 5.2% versus 5.5% in April.
