US core inflation (excluding food and energy) rose just 0.1% in May, marking the fourth consecutive month of lower-than-expected increases. This suggests businesses aren’t passing on higher tariff costs to consumers. Key points:
– Annual core inflation stands at 2.8%
– Goods prices remained flat, with declines in cars and clothing
– Service prices rose modestly (0.2%), with drops in airfares and hotels
– Markets reacted positively: Treasury bonds rallied, the dollar fell, and stocks rose
– Traders now see a 75% chance the Federal Reserve will cut interest rates by September
The weaker inflation data strengthens the case for potential Fed rate cuts later this year.