Nowcasts of U.S. inflation for May suggest that headline inflation will slow, but that core inflation will remain well above the Fed’s target. On June 13, the U.S. Bureau of Labor Statistics will release the Consumer Price Index report for May. Headline inflation has decelerated sharply since last summer, but core inflation has remained in a narrower range. The latest nowcasts don’t imply that that this will change much.
Nowcasts
The Cleveland Fed’s nowcast of inflation suggests that month-on-month inflation will come in at 0.19% and core inflation (which strips out food and energy) will be 0.45%. That would lead to an annualized inflation rate of 4.1% and 5.3% respectively. This would continue the trend of headline inflation dropping below core inflation that we’ve seen in March and April’s CPI figures. This forecast is based on observing current prices and imputing their likely impact on the inflation. Of course, nowcasting does not provide a perfect assessment of incoming inflation data.
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