U.S. May CPI May Return to "4% Range," Energy Price Surge Boosts Expectations of Rate Hike Later This Year

June 10: The U.S. Bureau of Labor Statistics (BLS) will release May consumer price index (CPI) data at 8:30 p.m. Beijing time this evening. Market consensus forecasts call for a 0.5% month-over-month rise in the May CPI, translating to a 4.2% year-over-year gain. That would mark the first time U.S. CPI has topped the 4% threshold since May 2023, and would put it at its highest reading since April of last year. Core CPI—excluding volatile food and energy prices—is projected to rise 0.3% month-over-month, with a 2.9% year-over-year increase, per consensus estimates. Driving much of this inflationary pressure has been the sharp jump in energy prices amid escalating U.S.-Iran tensions. Moody’s Analytics Chief Economist Mark Zandi recently pinned recent price hikes largely on government policies tied to the U.S.-Iran conflict. “Rising gasoline and diesel costs will push up prices for goods transported by these fuels—from groceries to Amazon packages,” he noted, adding that airlines have already passed higher jet fuel costs onto travelers. Liz Ann Sonders, chief investment strategist at Charles Schwab, said inflationary pressures now extend far beyond the energy sector, fueled by factors like money supply shifts and AI-related dynamics. Even if the Iran conflict is resolved quickly, Sonders added, oil prices may not fall back to previous lows, as production infrastructure has already been disrupted. The May CPI read—along with upcoming producer price index (PPI) data—will be key inputs for the Federal Reserve ahead of its June monetary policy meeting. In recent weeks, bond market traders have ramped up bets on additional interest rate hikes, with some analysts penciling in a possible Fed move as early as September. A larger-than-expected CPI beat in May—especially one showing broader inflation acceleration—would strengthen the case for the Fed to raise rates at some point this year.