Economists Durie and Wong say May headline US CPI is likely to be strong, but
core inflation—more relevant for the Fed rate outlook—should remain mild, with
the month-on-month increase consistent with a 2% target. Supply shocks have
pushed up airfares, appliances and electronics, while disinflation in
non-essential services suggests consumers are cutting discretionary spending. A
muted core print would ease market concern about further Fed hikes after May's
stronger-than-expected nonfarm payrolls. The economists still expect a 25bps Fed
cut in Q4.
