May US CPI showed headline inflation at a three-year high but core prices rose
more modestly, reducing near-term Fed rate-hike pressure. Today’s CPI and
tomorrow’s PPI will influence the Fed’s stance ahead of next week’s policy
meeting. Before the CPI print, CME FedWatch priced a 70% chance of a hike by
end-2026; markets now see a rate move next week as highly unlikely and put the
probability of a July hike at 13%. Near-term focus is whether the Fed will
explicitly shift from an easing bias toward neutral or tightening; this week’s
inflation prints and developments in US–Iran talks could tip that balance.
