The Daily Froth: May CPI Preview

Research evidence excerpt

The Daily Froth: May CPI Preview

Economics

U.S. Economics

The Daily Froth: May CPI Preview June 2, 2026

We're forecasting May core CPI of 0.24% MoM and headline CPI of 0.43% (vs consensus of 0.3% and

0.5%, respectively). That would be broadly consistent with April's underlying inflation trend after adjusting for

government shutdown-related distortions. We continue to expect modest pass-through from the Iran war to

airfares, while the impact on other core components is likely to emerge more gradually and remain relatively limited.

While the Fed's preferred inflation gauge, core PCE, typically runs slightly below core CPI, it has recently been

running somewhat hotter due to its larger weight on categories facing memory-related shortages in computer

goods, as well as elevated healthcare inflation. This impliesMay core PCE of 0.28% MoM.

Market sensitivity to individual inflation prints is likely lower than during periods when the Fed's policy path

was more directly tied to realized inflation. With the Fed seemingly in wait-and-see mode and barring a significant

change on the Iran war front, each inflation release may have less influence on rates than has historically been the

case. That said, with rate cuts largely off the table for now, an upside inflation surprise may generate a larger

market reaction than a comparable downside surprise.

Key details from our forecast:

Airfares should post another month of gains—we estimate a 1.5% MoM increase, as airlines continue to pass through

the impact of higher jet fuel prices while travel demand remains resilient. While fares are likely still moving higher, this

would represent a moderation from the 2.5%+ monthly increases seen over the prior two months following the onset

of the war.