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May consumer inflation expected fiery hot as gas, food and rent rose


While shopping at Walmart in North Brunswick (New Jersey), July 20, 2020, mask-wearing shoppers are common.

Eduardo Munoz | Reuters

Economists predict that May’s inflation will continue to be high, as energy, food and rent rise.

Dow Jones predicts that the consumer price index will rise by 0.7% in May, up from 0.3% April. This would translate to an 8.3% annual rate. It is the same as April. CPI reports are released every morning at 8:30 am. ET Friday.

Economists predict a cooling of core inflation. This means the measure that excludes energy and food. Dow Jones projects that core CPI will increase 0.5%, or 5.9% each year. Compare this to April’s 0.6% or 6.2% annualized.

It’s very alarming. This will reenergize worries about whether inflation has peaked,” stated Mark Zandi chief economist of Moody’s Analytics. I believe we have peaked. The quarter was at 8% in Q1.

The March high for year-overyear inflation was 8.5%

Sarah House is a senior economist at Wells Fargo. She doesn’t believe oil prices will peak and consequently, she doesn’t expect inflation to either. In May, she expects that headline CPI will rise by 8.4%.

“That’s the reason we have changed our outlook over the last week. We’ve seen gasoline hit record levels. She said that the only thing keeping the peak off is the current state of the energy industry. It is the national average for gasoline reached $4.97According to AAA, per gallon on Thursday

Since the market is keenly interested in whether inflation has peaked, that will impact how aggressive the Federal Reserve might be with interest rates hikes.

Fed will likely raise its target money rate by one-half point next week and then another in July. The pace of the increase will be less certain after this. Market participants were pricing in an over 70% probability of a September 50 basis point rise. A basis point equals 0.01%.

House stated that the May CPI will likely show that the Fed isn’t getting closer to price stability and may be a bit further from it. It’s not at its peak.

CPI is expected to remain stable for at least a couple of more months. She stated that there is no likelihood of a significant decline in CPI numbers before the fall.

Aditya Bhave, senior U.S. global economist with Bank of America, stated that while he believes there will be an inflation peak in the near future, he also expects another hot report to come out for May.

We peaked on a year over year basis. But that’s not what’s important. The Fed sees the issue as “Where do we go?” He stated.

Bhave stated that he expected core PCE inflation to fall to around 4% over the past year and to reach 3% at the end 2023. This is the most closely monitored metric by the Fed. Core PCE refers to personal consumption expenditure data. In April, core PCE inflation was 4.9%.

He expects CPI to rise by 0.8% in headline and 0.5% core.

His statement was, “The headline is driven by energy prices. Record high gasoline prices in May.” We expect that the increase in the core will be broad-based. This has been a pattern we have observed over the last few months. Inflation is not just about goods supply. The inflation story is much wider across all spending categories.

Bhave suggested that both shelter and health services could see substantial increases of 0.5%. About a third (32%) of CPI is spent on shelter.

Zandi stated that the outlook on inflation is closely tied to oil prices. According to Zandi, “The positive news about the inflation outlook is that supply chains are beginning to get oiled up.” Inventory is everywhere. This should reduce the pressure on prices for goods. The vehicle prices seem to be rolling over.