Attention on US inflation

Global markets have turned their attention to US inflation. A moderate softening is expected in US core consumer inflation to be announced today. US May inflation will be announced before the Federal Open Market Committee interest rate decision meeting that will start today. Annual consumer inflation in the US is expected to fall from 4.9 percent to 4.1 percent in May due to decreasing energy costs. Core inflation, which excludes volatile items such as food and energy, is expected to soften more limitedly from 5.5 percent to 5.2 percent. An upward surprise could result in the Fed, which is expected to pause interest rate hikes at this meeting, continuing to tighten. However, Citi states that this does not seem likely. According to Citi Strategist Raghav Datla, investors are not pricing in downside risks to inflation. Datla stated that an inflation rate that may fall below expectations could lower short-term inflation expectations. Bloomberg Economics Economist Anna Wong, who predicts inflation to soften in line with expectations, thinks that the June Fed decision could be the beginning of a longer-term stance on interest rates.