The market had anticipated a 0.1% increase in inflation. Still, the most recent data from the U.S. Producer Price Index (PPI) index revealed that it had dropped to -0.2% in May. Notably, the market is now more optimistic about a possible dovish posture by the Federal Reserve due to the declining inflation statistics.
Furthermore, the most recent U.S. CPI statistics increased investor confidence. Nevertheless, Fed Chair Jerome Powell’s most recent statement seems to dash hopes, suggesting that there would only be one rate decrease in 2024 if inflation stays above their 2% goal range.
Lowest Level of US PPI Inflation Since October 2023
According to the most recent data from the Bureau of Labor Statistics, U.S. PPI inflation decreased by 0.2% in May, following a 0.5% increase in the previous month. Interestingly, this is the biggest decline since October of last year. The unadjusted inflation rate decreased to 2.2% in May from 2.3% in the previous month. In addition, the market had anticipated 2.5% annual PPI inflation.
On the other hand, the Core PPI does not include trade, energy, or food services and has not moved from the previous month. Furthermore, the core PPI annual rate decreased to 2.3% in May from the 2.4% recorded in April. The market likewise anticipated the Core PPI annual rate of 2.4%.
Even if the most recent U.S. PPI inflation data indicates a decreasing trend in inflation, the market is exercising caution as it continues to hover beyond the Fed’s target range. Even though the Fed’s dot plot still shows two rate cuts this year, investors’ mood is affected by the Fed Chair’s recent remarks.
