What to Expect From Wednesday's Closely Watched CPI Inflation Report
Investopedia 11/06/2024 21:20


  • Forecasters expect an inflation report on Wednesday to show May was a tame month for consumer price increases.
  • Should predictions pan out, prices in May will have risen the smallest amount of any month since October, thanks largely to falling gasoline prices.
  • Cool inflation could pave the way for the Federal Reserve to cut interest rates later in the year, though May's data alone is unlikely to spur a rate cut.

Falling gas prices made May one of the tamest months for inflation since late last year, if forecasters are correct.

A Bureau of Labor Statistics report due Wednesday on the Consumer Price Index, a widely watched measure of the cost of living, is likely to show that prices rose 0.1% in May, down from a 0.3% increase in April and the smallest increase since October, according to a survey of economists by Dow Jones Newswires and the Wall Street Journal.1 That would mean prices rose 3.4% over the year, the same year-over-year rate as April.

Much of the relief for consumers came at the gas pump. Average nationwide prices for unleaded gas fell around 18 cents per gallon to $3.61 during May, according to Gasbuddy data, driving a large portion of the expected decrease, several economists said.

Should that projection pan out, it could help ease fears that inflation is flaring up again after falling significantly from the 41-year peak it hit in June 2022, when the CPI was up 9.1% over the previous 12 months.

Read more: Stock Market Crash Alert: Mark Your Calendars for June 12

Fed Wants Inflation Tamed Before Cutting Rates

Although the first three months of the year showed consumer prices rising more than expected, a relatively tame report in April raised hopes that the uptick was more of a fluke than a genuine resurgence. Should cooler inflation continue, it could encourage officials at the Federal Reserve to cut the central bank’s key interest rate later in the year.

“Progress on cooling inflation appears to have resumed in the second quarter, keeping Fed rate cuts on the table for later this year, though the exact timing will remain ‘data dependent,’” Scott Anderson, Chief U.S. economist at BMO Capital Markets, wrote in a commentary.

The Federal Reserve’s policy-setting committee has said they’re looking for economic data—especially inflation reports—to show that consumer prices are firmly on the path down to a 2% annual rate before they’ll cut interest rates. The central bank has maintained its key fed funds rate at a 23-year high since last July, pushing up borrowing costs for mortgages and other loans, in hopes of slowing the economy and stifling inflation.

Fed Keeping Close Eye on Core Inflation

Fed officials are set to announce an interest rate decision Wednesday afternoon, after the morning inflation report, and will likely scrutinize the details in the report.

Core inflation, which excludes volatile prices for food and energy, will be of special interest because economists view it as a more reliable gauge of the direction of prices since gas and food tend to rise and fall for reasons that have nothing to do with broader inflation trends.

The median forecast calls for core inflation to fall to a 3.5% annual reading from 3.6% in April. However, a few key core prices, including for used cars, may have increased notably, Ian Shepherdson chief economist at Pantheon Macroeconomics, predicted in a commentary, based on data from JD Power.


The content is provided as general information only and should not be taken as investment advice. All the contents shall not be taken as a recommendation to buy or sell any security or financial instruments. Any action you take resulting from information, analysis, or commentary on this article is your responsibility. Please consult your investment advisor before making any investments.

Stay informed with updates through our Telegram and WhatsApp channels

Access the latest financial market news
Get expert insights

Scan QR to join