CPI inflation is expected to rebound in May, reflecting base effects and the impact of Donald Trump’s trade tariffs 🔎
We’re just moments away from the release of the May CPI report — the most important macroeconomic publication of the week. The release is especially crucial given the current economic backdrop, including the ongoing trade war. This month’s data could reveal the first signs of the tariffs announced by Donald Trump at the beginning of April.
14:30 (U.S. time) – May CPI data:
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Create account Try a demo Download mobile app Download mobile app- CPI (MoM): forecast 0.2%; previous 0.2%
- CPI (YoY): forecast 2.5%; previous 2.3%
- Core CPI (MoM): forecast 0.3%; previous 0.2%
- Core CPI (YoY): forecast 2.9%; previous 2.8%
The consensus expects a 0.2% monthly rise in the headline CPI and a 0.3% monthly increase in core inflation (excluding food and energy).
Tariff Impact
May marked the first full month of the trade war’s intensified phase, making this a key report for assessing how trade restrictions are influencing U.S. prices. It’s expected to show the first core inflation uptick of the year, highlighting the real inflationary impact of tariffs. For example, audio equipment prices have started rising at a record pace over the past two months. Increases are also spreading to furniture, clothing, electronics, and automobiles — all heavily import-dependent categories.
On the other hand, service inflation has continued to decline in recent months, particularly due to lower transportation inflation, driven by falling fuel prices. Meanwhile, food inflation has picked up again.
Although tariffs on many key products fell in May, this hasn’t yet translated into lower consumer prices. Price increases are still expected in major consumer categories.
Inflation Outlook (Charts & Data)
Service inflation has declined quite noticeably in recent months (excluding rent costs). On the other hand, businesses are signaling that inflationary pressure is rising, as reflected in regional indices and ISM indices. Source: Macrobond, XTB
The price subindex from the ISM services report points to clearly rising inflationary pressure, which may lead to a halt in the further decline of service inflation. Source: Macrobond, XTB
Although on a yearly basis fuel prices are the main factor behind limited inflation, fuel prices have remained stable in recent months. The indicated price subindex from the ISM services report suggests in advance that inflation may rebound in the near term. Source: Macrobond, XTB
Inflation will likely rebound anyway due to base effects (unless we see a clear month-over-month drop). However, if international trade factors have a greater impact on inflation in the coming months, inflation could rebound more strongly than the path assumed by the average monthly inflation rate of 0.1–0.2%. Source: Macrobond, XTB
EURUSD
Market reaction ahead of the report is mixed. The U.S. dollar is slightly weaker against the euro, and a similar pattern can be seen in equity futures, which are marginally down after yesterday’s gains. Alongside CPI, investors are also awaiting any updates from the two-day trade talks between China and the U.S. At the time of publication, EUR/USD is up 0.08% to 1.14336.
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