US CPI (core) data the highest in 30 years. What is temporary?

Author: Eamonn Sheridan | Category: News

Comments from CIB (in brief) on Thursday US inflation report (US May CPI +5.0% y/y vs +4.7% expected)

CIBC Research info via eFX (bolding below is mine). 

Strong demand amidst supply chain bottlenecks during the economic re-openings caused prices to jump in the US in May. 
  • Total inflation advanced by 0.6% m/m, while the ex. food and energy core measure rose by 0.7% m/m, both ahead of consensus expectations for gains of 0.5% m/m on each measure. 
  • Price gains were somewhat broad-based, with a sharp rise in used car prices adding to strong gains in new cars, airfares, apparel, and household furnishings. 
  • That left the annual rates of headline and core inflation at 5.0% and 3.8%, respectively, which is the highest core reading in almost thirty years
This reading raises questions about what could mostly be temporary and related to supply chain issues, but could start to be built into inflation expectations. 
  • For now, we still see the Fed waiting until Q3 2022 for its first hike on evidence of a tightening in the labor market

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