The Line will be away for a few days starting today, but I wanted to give the latest on inflation and the Fed before skipping town.

Consumer Prices Unchanged in May

We got very good news on inflation from the CPI report, which showed no change in prices last month and a 3.3% increase over the past year. Both figures were down from April and below forecasts.

Here’s a breakdown of price changes over the past year by item.

“Core” CPI—which excludes food and energy prices—also came in lower than April and below estimates, rising 0.2% last month and 3.4% over the past year. The 3.4% increase in core CPI over the past year is the lowest annual increase since April 2021.

After waiting for months, we finally got a CPI report with better-than-expected data virtually across the board. The only significant negative piece of info was the 0.4% increase in housing costs last month, which are also up 5.4% over the past year. As I’ve said before, the Fed doesn’t worry too much about elevated housing costs as they believe they are temporary.

The May CPI report already has people dreaming of rate cuts in September, but I think that’s premature. The Fed will need to see a few more months of lower inflation before they’re ready to act. Remember that at 3.4%, core inflation is still well above their 2% target.

Let’s move on to the Federal Reserve.

Fed Holds Rates Steady, Predicts One Rate Cut This Year

That really says all you need to know about the Fed’s meeting this week. The Fed leaving rates unchanged is not a surprise, but the forecast of just one cut this year wasn’t as expected, especially after the better-than-expected CPI data came out on Wednesday.

Keep in mind that four times a year the Fed updates their economic projections, and there is no guarantee there will be only one rate cut this year. Other interesting items in the Fed’s projections included:

• They don’t expect inflation to reach their 2% goal until 2026.

• They expect to cut rates five times for a total of 1.25% sometime between now and the end of 2025.

• Inflation projections for 2024 and 2025 were revised slightly higher than their March forecasts.

That’s all folks, now I have to make my flight.

You can watch or listen to the latest episode of Gregory Heym's MORE Network Podcast, Crossing the Line on YouTube and  Apple Podcasts.