Svmuureports that economists Durie and Wong predict that the overall U.S. CPI data for May will be strong, but core inflation, which is more critical to the Federal Reserve's interest rate outlook, should remain moderate, with its month-on-month increase consistent with the 2% inflation target. Although supply shocks have pushed up prices for airfare, home appliances, and electronics, softening inflation in non-essential services indicates that consumers are cutting back on non-essential spending.
A moderate core inflation reading would alleviate market concerns about Fed rate hikes following the stronger-than-expected nonfarm payrolls data for May. The economists stated that they still expect the Federal Reserve to cut interest rates by 25 basis points in the fourth quarter of this year. (Jin Shi)