May Inflation Remains Tame Before Tariffs Hit Data
Consumer prices rose just 0.1% in May, falling short of expectations as inflation remained modest despite ongoing tariffs. Core inflation also came in below forecasts, with energy and vehicle prices declining and shelter contributing most to the modest rise. Analysts noted that tariff-related price increases have not yet fully appeared in the data, as businesses continue to rely on existing inventories. Meanwhile, political pressure mounts on the Federal Reserve to cut interest rates, though officials are holding off pending clearer signs of inflation trends and the effects of trade policy.
Consumer Sentiment Rebounds
Consumer sentiment improved sharply in early June, with the University of Michigan’s index rising to 60.5 amid signs of easing trade tensions and reduced inflation concerns. The outlook for near-term inflation dropped significantly, with the one-year expectation falling to 5.1%, down 1.5 percentage points. While sentiment remains below year-ago levels due to lingering geopolitical risks, consumers appear less alarmed by tariff impacts than in previous months. Despite soft inflation data, the Federal Reserve is expected to hold interest rates steady until at least September, despite pressure from President Trump to cut.
Markets React to Israel-Iran Escalation
Israel’s airstrikes on Iran rattled global markets, driving up oil and gold prices while boosting the U.S. dollar as investors sought safe-haven assets. Stocks initially fell worldwide on Friday but began recovering in early trading on Monday, with U.S. futures and Asia-Pacific markets rebounding as concerns about escalation eased. Retail sales in China surged more than expected in May, providing a bright spot amid geopolitical tensions, while Taiwan aligned with U.S. trade policy by blacklisting Huawei and SMIC. Despite the turmoil, analysts note that U.S. stocks remain resilient, with investor attention shifting toward the Federal Reserve’s rate decision later this week.
