Trump comments on inflation after CPI hits three-year high
U.S. headline CPI rose to 4.2 percent year-on-year in May, the highest in three years. President Trump said inflation would drop once the war against Iran ends, referring to barrels of oil taken out of the market. The remarks reignited debate over the Fed's policy path.
According to the Bureau of Labor Statistics, headline CPI rose to 4.2 percent year-on-year in May, the highest in three years. Core inflation held at 3.8 percent. An 11.4 percent jump in the energy component pushed up transportation costs, particularly gasoline. Speaking outside the White House, Trump said he loved this inflation and that prices would retreat once the Iran war ended.
The bond market reacted. The 10-year Treasury yield rose about 8 basis points, including a move through 4.52 percent. CME FedWatch data show market expectations of a July rate cut have fallen to 14 percent. Wells Fargo chief economist Jay Bryson said base effects would not contribute to disinflation over the next three months.
Federal Reserve Chair Jerome Powell is set to deliver his semi-annual report to Congress on Wednesday. Markets will watch closely for his remarks on the inflation outlook. Hawkish Fed officials including Boston's Bostic and Cleveland's Hammack are also due to speak this week. Not investment advice.
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