US inflation cools down 0.1% as odds of a June Fed rate cut diminish

Inflation in the United States rose just 0.1% in May, cooling more than expected and taking steam out of any talk about a June interest rate cut, according to data from the Bureau of Labor Statistics on Wednesday. The monthly figure was lower than what economists had predicted—0.2%—though the annual rate landed right on target at 2.4%. It’s the first time since January 2025 that the overall inflation rate has ticked higher, but the rise was marginal. When food and energy prices are taken out, the core inflation numbers tell a similar story. Core CPI also went up 0.1% for the month and is sitting at 2.8% annually. Analysts had expected 0.3% and 2.9% instead. The Fed tends to rely more on the core number to make decisions, and that weaker-than-forecast result adds to a growing pile of uncertainty. Some Fed officials have recently said they’re worried about the long-term effects of the Trump administration’s tariffs, but May’s numbers didn’t show that pressure yet. Fall in gas and car prices helped soften May CPI numbers A key reason behind the smaller increase in inflation was a continued drop in energy prices. Gasoline prices fell 2.6% in May alone, pushing the annual drop to 12%. That made energy as a whole decline by 1%. Meanwhile, vehicle prices also helped drag the index down. New cars fell 0.3%, and used vehicles were down 0.5%. Even apparel, expected to climb due to tariffs, slid 0.4%. On the other hand, food prices rose 0.3%, the same increase seen in shelter costs, which the BLS called the biggest driver of the overall CPI rise. But even shelter is cooling off a bit, with the yearly jump now at 3.9%, the slowest since late 2021. Some individual items moved in different directions. Egg prices dropped 2.7% in May, though they’re still a whopping 41.5% higher than a year ago. Real wages, adjusted for inflation, rose 0.3% in May. Over the past year, real average hourly earnings are up 1.4%, which is giving workers a bit more spending power—at least for now. Still, nobody in the Fed is calling this stability. Everyone’s watching what happens next, especially as more tariff effects kick in over the summer. White House pushes for rate cut, Fed unmoved President Donald Trump reacted quickly to the CPI data. On Truth Social, he posted , “CPI JUST OUT. GREAT NUMBERS! FED SHOULD LOWER ONE FULL POINT. WOULD PAY MUCH LESS INTEREST ON DEBT COMING DUE. SO IMPORTANT!!!” Trump has been calling for a rate cut for months, and this report gave him a new reason to press. JD Vance, the Vice President, echoed that push on X. “The president has been saying this for a while, but it’s even more clear: the refusal by the Fed to cut rates is monetary malpractice,” he wrote. But the Fed isn’t biting. Futures markets have already slashed the odds of a June cut to 0%. The central bank isn’t convinced that prices have truly settled down, especially with more tariffs still coming into play. Trade negotiations are still messy. Trump’s April 2 announcement—what he called “liberation day”—slapped a 10% universal tariff on all US imports and added “reciprocal duties” aimed at countries he claimed were abusing trade rules. That caused chaos in global markets. Now, White House officials are scrambling to strike new deals before a self-imposed early July deadline. Countries that don’t reach agreements could be stuck with long-term tariffs. The administration insists these tariffs won’t cause runaway inflation, arguing that foreign sellers will take the hit. But economists don’t all agree. Some say companies have been relying on inventory they stockpiled ahead of the tariff rollout. Once that runs out, the real cost increases could hit—hard. The broader the duties, the harder it is for that cost not to show up in prices. Meanwhile, as Cryptopolitan has reported , Trump is currently looking at possible replacements for Fed chair Jerome Powell. Former Fed governor Kevin Warsh and Treasury Secretary Scott Bessent are his top choices. Cryptopolitan Academy: Want to grow your money in 2025? Learn how to do it with DeFi in our upcoming webclass. Save Your Spot

Source: Cryptopolitan