The SPDR S&P 500 ETF (SPY) is now less than 2% from its all-time high of $613.23 after May’s consumer price index (CPI) report showed lower-than-expected inflation. Inflation increased by 0.1% month-over-month (MoM) and 2.4% year-over-year (YoY). Economists had forecast a monthly rise of 0.2% and a yearly rise of 2.4%.
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Core CPI, which excludes food and energy due to their volatility, rose by 0.1% MoM and 2.8% YoY. Both of these figures were below the economist estimates of 0.3% and 2.9%, respectively.
When will Tariffs Affect Inflation?
Many economists had believed that tariffs would begin to lift prices in May. That wasn’t the case, although the effects could still materialize in the coming months.
“Tariff-driven price increases may not feed through to the CPI data for a few more months yet, so it is far too premature to assume that the price shock will not materialize,” said Principal Asset Management Chief Global Strategist Seema Shah.
Rate cut odds are changing with the new inflation data. There is now a 99.8% chance that the Fed holds rates steady at the June 18 meeting, up from 97.3% yesterday. At the July meeting, there is a 18.6% chance that the Fed cuts by 25 basis points, up from 14.4% yesterday. With lower inflation, the Fed has more reason to bring rates down.
Keep track of other key economic metrics with TipRanks’ Economic Indicators Dashboard.
