0% CPI

The headline US CPI for May came in lower than expected at a stunning 0% month-on-month. While inflation remains above the Fed's 2% target, the trend toward slower inflation has resumed. The Fed nevertheless maintained its policy rate at 5.25-5.5%, a 23-year high. The median projection from its dot plot now shows only one rate cut in 2024. At ECP, we believe this confirms the downward trend in inflation and signals that central banks are at the end of their rate hiking cycle, albeit they cut at a slower pace than previously anticipated. As observed yesterday, the softer inflation numbers are positive for both equities and bonds.