Above-expectations inflation in May jeopardizes the accommodative stance on the part of the Federal Reserve. On a monthly basis, the Consumer Price Index (CPI) for the month of May rose by 0.6% in May against expectations of 0.5%. Year-over-year, the change in prices was 5% from 4.2% the previous month, the highest reading since 2008.
“Yet another big upside surprise for US inflation casts further doubt on the Fed’s claim that this is all transitory and that monetary policy can be left extremely loose for the next three years,” said James Knightley, chief economist. di Ing who expects to hear a change in the Fed’s language at the end of the summer.