CPI Data Remains Stable, No Tariff Impact Detected
Data released by the U.S. government on Wednesday showed that the Consumer Price Index (CPI) rose 0.1% month-on-month in May, up 2.4% year-on-year, slightly above the previous month's four-year low of 2.3% and below market expectations. The decline in energy prices was the main driver of the overall decline in inflation, with energy prices down 1% from the previous month and 3.5% from a year earlier. Food prices increased by 2.9% year-on-year, with grains and bakery products being the main contributors.
Excluding the volatile food and energy sectors, core CPI rose 2.8% year-on-year and 0.1% month-on-month, also below market expectations. This is the third consecutive month that core CPI has maintained this level. Prices in housing, healthcare, insurance, and other services rose moderately, supporting the rise in CPI.
However, it is noteworthy that goods inflation has not rebounded as expected. Despite the implementation of tariff policies, the prices of used cars, new cars, and clothing have all decreased. This reflects that the inflation transmission effect of the tariff policies initiated by Trump's administration in April has not yet fully manifested.
Trump Urges Federal Reserve to Cut Interest Rates
Following the data showing controlled inflation, U.S. President Trump once again called on social media for the Federal Reserve to "immediately cut interest rates by 100 basis points," stating that such a move would significantly reduce the burden of national debt interest and be of great importance. This statement continues his recent years of sustained pressure on the Federal Reserve's monetary policy.
Earlier this week, he criticized the Federal Reserve as being "Mr. Too Late," claiming that the U.S. is far behind Europe in terms of interest rate adjustments. He argues for a more aggressive rate cut by the Fed to stimulate economic growth and curb borrowing costs.
Market Remains Cautious About Timing of Rate Cuts
Despite Trump's frequent pressure, the Federal Reserve still shows a wait-and-see attitude. According to the Chicago Mercantile Exchange's (CME) FedWatch tool, the market expects the Fed to keep the current interest rate unchanged at its upcoming June meeting, with the first rate cut possibly delayed until September, with no more than two cuts expected for the year.
Analysts point out that the inflation shock from tariffs usually begins to appear 2 to 3 months later. Because companies stockpiled inventories before the tariffs were implemented, and overall demand remains weak, many companies are conservative in pricing, delaying the impact of tariffs.
In addition, some institutions believe that current consumer confidence is stable, and the strong labor market supports the Fed's reasoning for standing pat. Retailers like Walmart have already indicated that price increases will begin in June, suggesting that inflation may moderately rise in the second half of the year.
Policy Path Awaits Clarity in Trade Situation
Due to uncertainty about the "reciprocal tariff" policy, including the pace of implementation and the range of goods covered, companies generally adopt a wait-and-see strategy to avoid pricing risks. BNP Paribas pointed out that this strategy may delay price adjustments, leading to more persistent inflation.
St. Louis Fed President Mester warned that the Fed must be cautious of underestimating the persistence of inflation, especially in the context of possible continued tariff increases. Given the Fed's emphasis on "data-anchored" decision logic, a policy shift still requires more inflation evidence.
