Everything Depends on Trump's Words... The Direction of U.S. Interest Rates [Weekend Money]

Core Inflation in May Falls Short of Expectations

Headline Rate Remains Above 4%

Ultimate Key Lies in 'End of Middle East War'

As core inflationary pressures in the United States have eased more than market expectations, the U.S. Federal Reserve (Fed) has gained a "temporary margin for patience," allowing it to hold off on raising interest rates. However, there are concerns that it is still too early to be reassured, as the headline inflation rate has returned to the 4% range for the first time in three years and geopolitical risks remain persistent.

According to Daishin Securities on June 13, the U.S. Consumer Price Index (CPI) for May increased by 0.5% from the previous month and by 4.2% from the same month last year. While the headline inflation matched market expectations, it marked a return to a 4% annual growth rate for the first time in exactly three years. In contrast, core CPI, which excludes volatile food and energy prices, rose by 0.2% from the previous month and by 2.9% year-on-year, slightly below market forecasts.

Looking at the breakdown by item, factors that could provide some relief for the Fed were observed. The energy sector rose by 3.9% from the previous month, accelerating from April, but energy services stabilized, with the rate dropping from 1.6% to 0.4%. Furthermore, excluding energy, the rate of increase in all other sectors slowed compared to April. The rise in housing costs, which had rebounded last month due to statistical factors, was nearly halved from 0.6% to 0.3% month-on-month, while core goods prices excluding vehicles turned downward for the first time in six months, contributing to price stability in goods.

However, it is assessed that inflation risks have not completely disappeared and there is still no room for complacency. Given the recent movements in oil prices, it is likely that the headline inflation rate has reached its peak this time.

The researcher stated, "If, as President Trump has declared, the United States truly has the upper hand in negotiations, whether the Fed will end its patience and resume interest rate hikes will ultimately depend on whether an actual agreement is reached in the Middle East war negotiations."

This content was produced with the assistance of AI translation services.