ChainCatcher, citing Jinshi, reported that economists Durie and Wong expect the U.S. headline CPI reading for May to appear hot, while core inflation should remain moderate. According to their view, the month-over-month increase in core inflation is consistent with the 2% inflation target, suggesting that the broader CPI figure may be lifted by specific price pressures without the same degree of strength showing up in underlying inflation.
The report said supply shocks have pushed up prices for air tickets, household appliances and electronics, adding upward pressure to the overall CPI reading. At the same time, weaker inflation in non-essential services indicates that consumers are cutting back on discretionary spending. CPI is a key measure of changes in consumer prices, while core inflation is commonly used to observe the underlying inflation trend because it excludes more volatile components.
Durie and Wong said a mild core inflation print would ease market concerns about Federal Reserve rate hikes. The economists still expect the Federal Reserve to cut interest rates by 25 basis points in the fourth quarter of this year.