The US May consumer price index (CPI), due Wednesday, is expected to show the biggest one-month gain since 2023, according to multiple economists. Mark Zandi, chief economist at Moody's Analytics, said the inflation drivers have shifted from pandemic-era supply chain disruptions to a combination of government policies including tariffs, war costs and fiscal spending.
Energy Costs Lead the Surge
Energy accounts for about 10% of the overall CPI basket, but rising diesel prices have pushed up costs across trucking, raising the price of everything from groceries to Amazon deliveries. Jet fuel costs have also lifted airfares, with carriers amplifying price pressures during the peak summer travel season.
CBS Poll: 75% of Americans Feel Incomes Are Falling Behind
A recent CBS News poll found that 75% of Americans say their incomes are not keeping pace with inflation. Despite nominal wage growth, real purchasing power continues to erode. Zandi described this as a "collective psychological erosion" after nearly five years since inflation last hit the Fed's 2% target.
Structural Difference from Pandemic Inflation: Policy vs. Supply Chains
Zandi told CNBC that the 2025-2026 inflation wave differs structurally from the pandemic era: pandemic inflation was driven by supply chain breakdowns leading to shortages, while the current phase stems from active cost-push via tariffs, war costs, and fiscal expansion. Brent crude futures rose over 8% in May, an extra variable added by the Iran conflict.
Implications for Taiwan Markets
Higher US CPI would transmit to Taiwan via three channels: Fed policy, the Taiwan dollar exchange rate, and costs for heavyweight stocks. A hot May reading would further dim prospects for a Fed rate cut in June. President Trump has delegated the rate decision to Treasury Secretary Warsh, but inflation data remains his key input. Exporters like TSMC could benefit from a stronger USD/TWD rate, though raw material costs may also rise. Wednesday's CPI release will be the first crucial marker for the rate path in the second half of 2026.