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Why May’s Surprisingly Low Inflation Won’t Last—And the Fed Knows It

May’s inflation data showed surprisingly low price increases, with CPI rising just 0.1% monthly and staying under 2.5% annually.

Key categories like cars and clothing actually saw price drops despite new tariffs. This “missing inflation” may be due to businesses stockpiling imports before tariffs hit and weak consumer demand.

However, this calm is likely temporary. Business costs are rising rapidly, and these will eventually be passed to consumers. Despite market hopes for Fed rate cuts, the central bank will probably keep rates steady through 2025, having learned from past mistakes about “transitory” inflation.

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