May CPI Seen at 4.0%, 0.1% Cooler than Expected

May CPI Seen at 4.0%, 0.1% Cooler than Expected


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May CPI comes in 0.1% under expectations YoY (4.0% vs 4.1% est), and in line with MoM expectations (0.1% vs 0.1% best). May was the 11th consecutive month where CPI has been lower than the prior month, YOY. Markets are rising as a result.

May CPI Result: 4.0% vs 4.1% est.

  • May MoM CPI: 0.1% vs Est: +0.1%; Prev. +0.4%
  • May YoY CPI: 4.0% vs Est: +4.1%; Prev. +4.9%
  • May MoM Core CPI: 0.4% vs Est: +0.4%; Prev. +0.4%
  • May YoY Core CPI: 5.3% vs Est +5.3%; Prev. +5.5%

This is in line with Citi, Wells Fargo, Morgan Stanley, Barclays, and Credit Suisse’s expectations.

May CPI Hedge Fund Predictions Coming Into the Event

  • CITI 4.0%
  • WELLS FARGO 4.0%
  • BARCLAYS 4.0%
  • UBS 4.1%
  • HSBC 4.1%
  • JP MORGAN 4.2%

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Looking Back: 12-Months of CPI Data

  • Jun 2022: 9.1%
  • Jul 2022: 8.5%
  • Aug 2022: 8.3%
  • Sep 2022: 8.2%
  • Oct 2022: 7.7%
  • Nov 2022: 7.1%
  • Dec 2022: 6.5%
  • Jan 2023: 6.4%
  • Feb 2023: 6.0%
  • Mar 2023: 5.0%
  • Apr 2023: 4.9%

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June 14th FOMC: Fed Funds Futures

All eyes are on the CPI this morning ahead of tomorrow’s June 14th FOMC meeting, where the Fed is largely expected to pause rate hikes (June 12th: 70% chance of a pause, 30% chance of a 25 bps hike). As of June 12th, there was a 33% expectation of the Fed cutting rates at least once before the end of the year. That’s less than the a few months ago, but still indicates at least a third of the market believes in an outcome that Fed officials largely deny will happen. With today’s CPI coming in softer than expected, those Fed Funds Futures are likely to move rapidly in the direction of “no hike” tomorrow.

Market Reaction to May CPI

The market reaction to the May CPI was slow, but consistent with what we would expect in a positive inflation reading, with stocks largely rising at a slow clip. Here are a few notable reactions:

  • SPY: +0.25%
  • QQQ: +0.58%
  • IWM: +0.21%
  • MSFT: +0.58%
  • NVDA: +1.18%
  • XOM: +0.78%
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