Inflation Research Brief

Monthly inflation pace slows. May CPI data did not show that inflation is solved, but the report offered signs that the most disruptive phase of the price shock may be easing. Headline CPI rose 0.5 percent in May, down from 0.6 percent in April, bringing the annual rate to 4.2 percent. The report also showed pressure stayed concentrated rather than broad-based, as higher energy prices drove much of the increase. Core CPI rose just 0.2 percent month-over-month and 2.9 percent year-over-year, signaling limited spillover into other categories. This contained core reading gives little evidence for near-term Fed rate hikes, barring another major shock. While elevated energy costs may still weigh on household budgets, slower inflation momentum should help preserve consumer spending and tenant activity.